The demand for loanable funds curve shows that the higher the real interest rate, the
A) smaller the quantity of loanable funds demanded.
B) smaller the demand for loanable funds.
C) larger the quantity of loanable funds demanded.
D) larger the demand for loanable funds.
E) more the loanable funds demand curve shifts leftward.

Question

Quizplus · Accepted Answer

As the real interest rate increases, borrowing becomes more costly, which leads to a decrease in the quantity of loanable funds demanded. This is represented by a movement upwards along the demand curve. Therefore, the correct answer is A - smaller the quantity of loanable funds demanded.

The Demand for Loanable Funds Curve Shows That the Higher