In the loanable funds market, the demand for loanable funds is negatively sloped because of the:

Question

Quizplus · Accepted Answer

The demand for loanable funds is negatively sloped because as the real interest rate increases, the cost of borrowing and obtaining funds increases, which leads to fewer individuals or firms seeking to borrow funds. Conversely, as the real interest rate decreases, the cost of borrowing decreases, leading to an increase in the quantity of funds demanded. Therefore, the demand for loanable funds exhibits an inverse relationship with the real interest rate.

In the Loanable Funds Market, the Demand for Loanable Funds