The table below shows data for the U.S. $$\begin{array} { | c | c | c | }
\hline & \begin{array} { c }
\text { Nominal } \
\text { Interest Rate }
\end{array} & \text { Inflation Rate } \
\hline 2011 & 5.25 & 4 \
\hline 2012 & 5 & 2 \
\hline 2013 & 4.5 & 4.3 \
\hline
\end{array}$$
Between 2012 and 2013 the real interest rate ________ and caused a ________ the demand for loanable funds curve.

Question

The table below shows data for the U.S. $$\begin{array} { | c | c | c | } 
\hline & \begin{array} { c } 
\text { Nominal } \
\text { Interest Rate }
\end{array} & \text { Inflation Rate } \
\hline 2011 & 5.25 & 4 \
\hline 2012 & 5 & 2 \
\hline 2013 & 4.5 & 4.3 \
\hline
\end{array}$$
Between 2012 and 2013 the real interest rate ________ and caused a ________ the demand for loanable funds curve.

Quizplus · Accepted Answer

The real interest rate is calculated as nominal interest rate minus inflation rate. 
For 2012, 
Real interest rate = 5 - 2 = 3 
For 2013, 
Real interest rate = 4.5 - 4.3 = 0.2 
Therefore, the real interest rate decreased between 2012 and 2013. This decrease results in a movement down along the demand for loanable funds curve, as lower real interest rates lead to increased demand for loanable funds. Thus, option B, decreased; movement down along, is the correct choice.

The Table Below Shows Data for the U Between 2012 and 2013 the Real Interest Rate ________ and |