When saving (the supply of loanable funds) increases as the interest rate increases, an increase in investment demand results in a ______ interest rate and ______ in the quantity of investment.
A) higher; no change
B) higher; an increase
C) lower; no change
D) lower; an increase

Question

Quizplus · Accepted Answer

When investment demand increases, it shifts the demand curve for loanable funds to the right. Given that the supply of loanable funds increases with the interest rate, this shift results in a new equilibrium with a higher interest rate and an increased quantity of investment. This is because the higher interest rate incentivizes more savings, making more funds available for investment.

When Saving (The Supply of Loanable Funds) Increases as the Interest