All else equal,if individuals save less because inflation lowers returns on savings,this should ________ the supply of loanable funds and ________ the capital stock.

Question

Quizplus · Accepted Answer

Low returns on savings will discourage individuals from saving, resulting in a decrease in the supply of loanable funds available to borrowers. This decrease in the supply of loanable funds will lead to a reduction in investment in the capital stock, since there will be fewer funds available for firms to borrow and invest in new projects.

All Else Equal,if Individuals Save Less Because Inflation Lowers Returns