-In the above figure, the initial supply of loanable funds curve is SLF₀ and the demand for loanable funds investment curve is DLF₀. An increase in the real interest rate to 7 percent could be caused by

Question

-In the above figure, the initial supply of loanable funds curve is SLF<sub>0</sub> and the demand for loanable funds investment curve is DLF<sub>0</sub>. An increase in the real interest rate to 7 percent could be caused by A) an increase in investment demand. B) a decrease in the expected profit. C) an increase in people's disposable incomes. D) an expansion that increased both saving and investment by the same amount.

Quizplus · Accepted Answer

An increase in investment demand would shift the demand for loanable funds curve to the right, increasing the equilibrium interest rate to match the higher demand at each interest rate level.

-In the Above Figure, the Initial Supply of Loanable Funds