Which of the following is true?
I. As the real interest rate increases, people increase the quantity they save.
II. The supply of loanable funds curve is downward sloping.
III. As disposable income increases, the supply of loanable funds curve becomes steeper.

Question

Quizplus · Accepted Answer

Statement I is incorrect; as the real interest rate increases, people tend to decrease the quantity they save. Statement II is also incorrect; the supply of loanable funds curve is upward sloping, as an increase in the interest rate provides an incentive for savers to supply more funds to the market. Statement III is incorrect as there is no relationship between disposable income and the slope of the supply of loanable funds curve.

Which of the Following Is True