What does a higher interest rate induce people to do?
A) save more, so the supply of loanable funds slopes upward
B) save less, so the supply of loanable funds slopes downward
C) invest more, so the supply of loanable funds slopes upward
D) invest less, so the supply of loanable funds slopes downward

Question

Quizplus · Accepted Answer

A higher interest rate induces people to save more because they are incentivized to earn a higher return on their savings. Therefore, the supply of loanable funds slopes upward, meaning there is more money available for lending.

What Does a Higher Interest Rate Induce People to Do