The derived demand curve for loans slopes downward because as interest rates
A)fall, future income becomes less valuable.
B)fall, investors develop pessimistic expectations.
C)fall, future income becomes more valuable.
D)rise, investors become pessimistic.

Question

Quizplus · Accepted Answer

When interest rates fall, future income becomes more valuable, thereby making borrowers more willing to take loans to finance their investments. This leads to an increase in the quantity demanded of loans, resulting in a downward sloping demand curve for loans.

The Derived Demand Curve for Loans Slopes Downward Because as Interest