The demand for loanable funds
A) increases in an expansion and decreases in a recession.
B) decreases in an expansion and increases in a recession.
C) increases if population growth declines.
D) increases if the expected rate of profit decreases.
E) increases if wealth increases.

Question

Quizplus · Accepted Answer

When the economy is expanding, firms invest more to increase production and therefore demand more loanable funds. In a recession, firms cut back on investment, decreasing the demand for loanable funds.

The Demand for Loanable Funds