If during booming times in the economy saving falls,then the equilibrium real interest rate _____ and the quantity of loanable funds ________.
A) falls;rises
B) rises;falls
C) falls;falls
D) rises;rises

Question

Quizplus · Accepted Answer

When saving falls during booming times, people tend to spend more and save less. This leads to a decrease in the supply of loanable funds, causing the equilibrium real interest rate to rise. At the same time, the quantity of loanable funds demanded by borrowers decreases due to higher interest rates, resulting in a fall in the quantity of loanable funds.

If During Booming Times in the Economy Saving Falls,then the Equilibrium