Which of the following occurs if the expected profit increases?
A) Investment demand increases and the demand for loanable funds curve shifts rightward.
B) Investment demand decreases and the demand for loanable funds curve shifts leftward.
C) The quantity of investment demanded increases and there is a movement down along the demand for loanable funds curve.
D) The quantity of investment demanded decreases and there is a movement up along the demand for loanable funds curve.
E) The savings increases and the supply of loanable funds curve shifts rightward.

Question

Quizplus · Accepted Answer

An increase in expected profit would lead to an increase in investment demand, which would shift the demand for loanable funds curve rightward. This is because firms would want to borrow more funds to invest in profitable opportunities.

Which of the Following Occurs If the Expected Profit Increases