Suppose that there is an increase in future expected disposable income and simultaneously an increase in the profitability of investment.As a result, the equilibrium real interest rate ________ and the equilibrium quantity of loanable funds ________.

Question

Quizplus · Accepted Answer

An increase in future expected disposable income increases consumption, reducing savings, while an increase in investment profitability raises demand for loanable funds. The real interest rate rises, but the effect on the quantity of loanable funds is uncertain due to opposing shifts in supply and demand.

Suppose That There Is an Increase in Future Expected Disposable