The demand for loanable funds increases if
A) technological growth slows.
B) population growth slows.
C) expected profit increases.
D) firms fear a recession.
E) wealth increases.

Question

Quizplus · Accepted Answer

When expected profit increases, businesses are more likely to invest in new projects or expand their operations, which requires additional funds. This increased demand for funds leads to a higher interest rate and an increase in the quantity of loanable funds demanded. The other choices (A, B, D, and E) do not necessarily lead to an increase in the demand for loanable funds.

The Demand for Loanable Funds Increases If