During a recession, firms' expected profit from investment ________ so the demand for loanable funds curve ________.
A) falls; shifts rightward
B) falls; shifts leftward
C) rises; shifts rightward
D) rises; shifts leftward
E) falls; does not shift

Question

Quizplus · Accepted Answer

During a recession, firms' expected profit from investment falls as the demand for their goods and services decreases. This reduces the demand for loanable funds, as firms are less likely to invest in new projects. Therefore, the demand for loanable funds curve shifts leftward.

During a Recession, Firms' Expected Profit from Investment ________ So