How does the supply of loanable funds curve slope?
A) upward because an increase in the interest rate induces people to save more
B) downward because an increase in the interest rate induces people to save less
C) downward because an increase in the interest rate induces people to invest less
D) upward because an increase in the interest rate induces people to invest more

Question

Quizplus · Accepted Answer

The supply of loanable funds curve slopes upward because as the interest rate increases, people are incentivized to save more. This is because higher interest rates mean they can earn a higher return on their savings. Therefore, as the interest rate goes up, the quantity of loanable funds supplied also goes up.

How Does the Supply of Loanable Funds Curve Slope