An increase in disposable income shifts the supply of loanable funds curve

Question

Quizplus · Accepted Answer

An increase in disposable income increases consumption and decreases saving. As saving decreases, the supply of loanable funds shifts leftward. This causes an increase in the real interest rate as the quantity of loanable funds demanded exceeds the quantity supplied. Therefore, choice C - rightward shift in the supply of loanable funds curve and a decrease in the real interest rate - is the best answer.

An Increase in Disposable Income Shifts the Supply of Loanable