As the real interest rate rises, the quantity of loanable funds supplied ________ and the quantity of loanable funds demanded ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change

Question

Quizplus · Accepted Answer

As the real interest rate rises, saving becomes more attractive, leading to an increase in the quantity of loanable funds supplied. Conversely, borrowing becomes more expensive, leading to a decrease in the quantity of loanable funds demanded.

As the Real Interest Rate Rises, the Quantity of Loanable