Which of the following is likely to cause a decrease in the equilibrium U.S. interest rate, other things being equal?
A)a decrease in saving by foreign savers
B)an increase in inflation
C)pessimistic economic projections that cause businesses to reduce expansion plans
D)a decrease in saving by U.S. households

Question

Which of the following is likely to cause a decrease in the equilibrium U.S. interest rate, other things being equal? ​
A)a decrease in saving by foreign savers
B)an increase in inflation
C)pessimistic economic projections that cause businesses to reduce expansion plans
D)a decrease in saving by U.S. households

Quizplus · Accepted Answer

Pessimistic economic projections can lead to businesses reducing their expansion plans, which in turn decreases the demand for loans. Lower demand for loans can lead to a decrease in the equilibrium interest rate, as less borrowing demand puts downward pressure on rates.

Which of the Following Is Likely to Cause a Decrease