The supply of loanable funds schedule shows that the

Question

Quizplus · Accepted Answer

According to the loanable funds theory, the supply of loanable funds increases as the real interest rate increases because potential lenders are willing to lend more at higher interest rates. This is because a higher interest rate means a higher return on investment, which makes lending more attractive. Therefore, option A is correct. Option B is incorrect because a higher real interest rate increases the opportunity cost of borrowing, not the opportunity cost of lending. Option C is incorrect because higher interest rates increase the opportunity cost of lending. Option D is incorrect because the quantity of loanable funds supplied decreases as interest rates fall. Option E is incorrect because a change in the interest rate causes movement along the supply of loanable funds curve, not a shift in the curve itself.

The Supply of Loanable Funds Schedule Shows That the