Figure 13-1

-Refer to the FigurE₁3-1e.In the figure shown,if the real interest rate is 4 percent,which of the following changes will there be pressure for?
A)the real interest rate to rise
B)the demand for loanable funds curve to shift right
C)the supply for loanable funds curve to shift left
D)the real interest rate to fall

Question

Figure 13-1
 
-Refer to the FigurE₁3-1e.In the figure shown,if the real interest rate is 4 percent,which of the following changes will there be pressure for?
A)the real interest rate to rise 
B)the demand for loanable funds curve to shift right 
C)the supply for loanable funds curve to shift left 
D)the real interest rate to fall

Quizplus · Accepted Answer

In the given figure, the equilibrium real interest rate is at point A where the demand for loanable funds curve intersects the supply for loanable funds curve. If the real interest rate is 4 percent and there is pressure for a change, it means that either the demand for loanable funds curve will shift to the right, indicating an increase in borrowing demand or the supply for loanable funds curve will shift to the left, indicating a decrease in saving supply. However, since the question asks about the pressure for a change, we can assume that there is no external factor causing the shift in demand or supply curve. Therefore, the only remaining option is for the real interest rate to rise, which would create an incentive for savers to supply more funds and for borrowers to demand less funds until a new equilibrium is reached at a higher real interest rate.

Figure 13-1 -Refer to the FigurE₁3-1e.In the Figure Shown,if the Real Interest