An increase in the expected profit from new capital brings about a
A) movement up along the demand for loanable funds curve.
B) movement down along the demand for loanable funds curve.
C) rightward shift of the demand for loanable funds curve.
D) leftward shift of the demand for loanable funds curve.
E) rightward shift of the supply of loanable funds curve.

Question

Quizplus · Accepted Answer

An increase in the expected profit from new capital would encourage firms to borrow more funds to invest in new projects, leading to a higher demand for loanable funds. This would shift the demand for loanable funds curve to the right. Therefore, option C is the correct answer.

An Increase in the Expected Profit from New Capital Brings