On a graph,the private sector's demand for loanable funds curve is
A) upward sloping
B) vertical
C) horizontal
D) downward sloping
E) horizontal then upward sloping

Question

Quizplus · Accepted Answer

The private sector demand for loanable funds curve is downward sloping because, as interest rates increase, the cost of borrowing funds for investment also increases, resulting in a decrease in the quantity demanded. Conversely, as interest rates decrease, the cost of borrowing funds for investment decreases, resulting in an increase in the quantity demanded. This inverse relationship between the interest rate and the quantity demanded of loanable funds creates the downward-sloping demand curve.

On a Graph,the Private Sector's Demand for Loanable Funds Curve