Fred is considering expanding his skateboard shop.What will happen if interest rates rise?
A) He is less likely to expand.This illustrates why the supply of loanable funds slopes downward.
B) He is more likely to expand.This illustrates why the supply of loanable funds slopes upward.
C) He is less likely to expand.This illustrates why the demand for loanable funds slopes downward.
D) He is more likely to expand.This illustrates why the demand for loanable funds slopes upward.

Question

Quizplus · Accepted Answer

If interest rates rise, borrowing becomes more expensive, making Fred less likely to expand. This illustrates why the demand for loanable funds slopes downward, as higher interest rates lead to less borrowing.

Fred Is Considering Expanding His Skateboard Shop