The credit demand curve is the schedule that reports the relationship between the quantity of credit demanded and ________ in an economy,assuming all else equal.

Question

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The quantity of credit demanded is typically inversely related to the real rate of interest, assuming all else equal. As the cost of borrowing (real interest rate) decreases, borrowers are more likely to demand credit for investment, and the quantity of credit demanded increases. Factors such as the average tax rate and annual inflation rate may affect credit demand indirectly through secondary effects on economic activity or interest rates, but they do not have a direct effect on the credit demand curve. The nominal rate of interest is the real rate of interest adjusted for inflation, so it also indirectly affects credit demand through its impact on borrowing costs.

The Credit Demand Curve Is the Schedule That Reports the Relationship