Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.
-Refer to Figure 26-3.Which of the following movements shows the effects of a new law that makes more people than before eligible for Individual Retirement Accounts?

Question

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 26-3.Which of the following movements shows the effects of a new law that makes more people than before eligible for Individual Retirement Accounts?

Quizplus · Accepted Answer

The new law that makes more people eligible for Individual Retirement Accounts would increase the supply of loanable funds, causing the supply curve to shift from S1 to S2. This would lead to a decrease in the equilibrium interest rate from r1 to r2, and an increase in the equilibrium quantity of loanable funds from Q1 to Q2. This movement is shown by a movement from Point C to Point F.