What does a higher real interest rate lowers the quantity of?
A)national saving
B)net capital outflow
C)loanable funds demanded
D)loanable funds supplied

Question

Quizplus · Accepted Answer

When the real interest rate is high, the cost of borrowing money increases, leading to a decrease in loanable funds demanded by consumers and businesses, as they will be less likely to take out loans. This decrease in loanable funds demanded also results in a decrease in the quantity of investment, which in turn lowers the quantity of loanable funds supplied. However, this does not necessarily lead to a decrease in national saving or net capital outflow.

What Does a Higher Real Interest Rate Lowers the Quantity