A decrease in the real interest rate leads to a ________ the demand for loanable funds curve, and a decrease in the expected profit leads to a ________ the demand for loanable funds curve.
A) rightward shift in; leftward shift in
B) movement down along; movement up along
C) rightward shift in; movement up along
D) movement down along; leftward shift in

Question

Quizplus · Accepted Answer

A decrease in the real interest rate causes a movement down along the demand for loanable funds curve, as borrowing becomes cheaper. A decrease in expected profit reduces the incentive to borrow, leading to a leftward shift in the demand for loanable funds curve.

A Decrease in the Real Interest Rate Leads to a ________