If expectations about the future don't change at all, then an economic downturn will generally:
A) decrease savings at a given interest rate and shift the supply curve for loanable funds to the left.
B) increase savings at a given interest rate and shift the supply curve for loanable funds to the left.
C) decrease savings at a given interest rate and shift the supply curve for loanable funds to the right.
D) increase savings at a given interest rate and shift the supply curve for loanable funds to the right.

Question

Quizplus · Accepted Answer

If expectations about the future don't change at all, then an economic downturn would decrease confidence in the economy and decrease consumption, leading to a decreased demand for loanable funds. This would result in a decrease in savings at a given interest rate and a leftward shift of the supply curve for loanable funds.

If Expectations About the Future Don't Change at All, Then