The figure above shows the market for loanable funds.The supply of loanable funds curve shifts rightward.
-The change illustrated in the figure above is part of the transmission process of the Fed's monetary policy.As a result of the increase in the supply of loanable funds, aggregate demand ________, real GDP ________, and the price level ________.

Question

Quizplus · Accepted Answer

An increase in the supply of loanable funds will lead to lower interest rates, which will increase investment and consumption spending, leading to an increase in aggregate demand. This increase in aggregate demand will lead to an increase in real GDP and an increase in the price level. Therefore, the correct answer is B.

The Figure Above Shows the Market for Loanable Funds