In 2010, the United States and foreign economies start to recover from the recession. U.S. firms increase their profit expectations. As a result, the demand for loanable funds curve shifts ________ and the real interest rate ________.

Question

Quizplus · Accepted Answer

When U.S. firms increase their profit expectations, they are likely to invest more, increasing the demand for loanable funds. This shifts the demand curve for loanable funds rightward, and as demand increases, the real interest rate also increases due to higher competition for available funds.

In 2010, the United States and Foreign Economies Start to Recover