An increase in the quantity of loanable funds demanded occurs when
A) the real interest rate falls.
B) the real interest rate rises.
C) the supply of loanable funds decreases.
D) the expected profit rises.
E) wealth decreases.

Question

Quizplus · Accepted Answer

When the real interest rate falls, it becomes cheaper for borrowers to take out loans and invest in projects that require funding. This leads to an increase in demand for loanable funds.

An Increase in the Quantity of Loanable Funds Demanded Occurs