The fact that there are fewer and fewer potential investments that will generate returns high enough to make the cost of paying back a loan worthwhile is reflected in the:
A) upward-slope of the supply curve in the market for loanable funds.
B) downward-slope of the supply curve in the market for loanable funds.
C) upward-slope of the demand curve in the market for loanable funds.
D) downward-slope of the demand curve in the market for loanable funds.

Question

Quizplus · Accepted Answer

The downward-slope of the demand curve in the market for loanable funds reflects that as interest rates decrease, more investments become viable, but as interest rates increase, fewer investments can generate returns high enough to justify the cost of borrowing.

The Fact That There Are Fewer and Fewer Potential Investments