Use the following to answer question(s): Loanable Funds and Capital Markets

-(Exhibit: Loanable Funds and Capital Markets) If in Panel (c) saving increases from S₂ to S₁, then:

Question

Use the following to answer question(s): Loanable Funds and Capital Markets
 
-(Exhibit: Loanable Funds and Capital Markets) If in Panel (c) saving increases from S₂ to S₁, then:

Quizplus · Accepted Answer

When saving increases from S₂ to S₁, it leads to an increase in the supply of loanable funds, which typically lowers the interest rate and increases the quantity of capital demanded. This is reflected in Panel (d) by a movement along the demand curve for capital from K₂ to K₁, assuming all other factors remain constant.

Use the Following to Answer Question(s): Loanable Funds and Capital