Figure 14-1

-Refer to Figure 14-1. In the Figure shown, if the real interest rate is 6 percent, there will be pressure for
A) the real interest rate to fall.
B) the demand for loanable funds curve to shift left.
C) the supply for loanable funds curve to shift right.
D) All of the above are correct.

Question

Figure 14-1
 
-Refer to Figure 14-1. In the Figure shown, if the real interest rate is 6 percent, there will be pressure for
A) the real interest rate to fall. 
B) the demand for loanable funds curve to shift left. 
C) the supply for loanable funds curve to shift right. 
D) All of the above are correct.

Quizplus · Accepted Answer

At a real interest rate of 6 percent, borrowers will find it more costly to borrow, and lenders will find it more rewarding to save or invest. This will create pressure for the real interest rate to fall so that the market for loanable funds can remain in equilibrium. Therefore, the correct choice is A. The demand and supply for loanable funds curves are not affected by changes in the real interest rate.

Figure 14-1 -Refer to Figure 14-1. in the Figure Shown, If the Figure