If consumers elect to postpone consumption to have a more enjoyable future, the supply of loanable funds would increase and the market rate of interest would fall.

Question

If consumers elect to postpone consumption to have a more enjoyable future, the supply of loanable funds would increase and the market rate of interest would fall.​

Quizplus · Accepted Answer

If consumers postpone consumption, they will save more money, which will increase the supply of loanable funds. This increase in supply will lower the market rate of interest since lenders will have more funds to loan out and will thus reduce the cost of borrowing. Thus, the statement is true.

If Consumers Elect to Postpone Consumption to Have a More