When disposable income increases, saving will
A) decrease, and there is a movement downward along the supply of loanable funds curve.
B) decrease, and the supply of loanable funds curve shifts leftward.
C) increase, and the supply of loanable funds curve shifts rightward.
D) not change.
E) increase, and there is a movement upward along the supply of loanable funds curve.

Question

Quizplus · Accepted Answer

When disposable income increases, individuals have more income available to save, leading to an increase in savings. This increase in savings shifts the supply of loanable funds curve rightward, indicating a greater supply of funds available for lending at every interest rate.

When Disposable Income Increases, Saving Will