Under the loanable funds theory of interest rates, if a new technology is developed that increases the demand for funds by businesses, which of the following statements is correct?
A) The supply curve for loanable funds will shift back, intersecting with the demand curve for loanable funds at a higher equilibrium real interest rate.
B) The demand curve for loanable funds will shift back, intersecting with the supply curve for loanable funds at a lower equilibrium real interest rate.
C) The demand curve for loanable funds will shift out, intersecting with the supply curve for loanable funds at a higher equilibrium real interest rate.
D) No change in interest rates will occur.
Correct Answer:
Verified
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