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Exhibit: Keynesian Cross and Loanable Funds

-(Exhibit: Keynesian Cross and Loanable Funds)Both graphs illustrate the inverse relationship between the equilibrium interest rate and the equilibrium level of income.The economy moves from equilibrium A to equilibrium B in the Loanable Funds diagram as a result of a(n)______ that shifts saving.
A) increase in income
B) decrease in income
C) increase in the interest rate
D) decrease in the interest rate

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Exhibit: Keynesian Cross and Loanable Funds
 
-(Exhibit: Keynesian Cross and Loanable Funds)Both graphs illustrate the inverse relationship between the equilibrium interest rate and the equilibrium level of income.The economy moves from equilibrium A to equilibrium B in the Loanable Funds diagram as a result of a(n)______ that shifts saving.
A) increase in income 
B) decrease in income 
C) increase in the interest rate 
D) decrease in the interest rate

Quizplus · Accepted Answer

An increase in income leads to higher savings, shifting the supply of loanable funds to the right, which moves the economy from equilibrium A to equilibrium B in the Loanable Funds diagram.

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