Multiple Choice
Which of the following explains why the demand for loanable funds is negatively related to the real interest rate?
A) A lower real interest rate makes more investment projects profitable.
B) Consumers are willing to spend less and hence save more at higher real interest rates.
C) Interest rate flexibility in financial markets assures an equilibrium in which saving equals investment.
D) All of the above are reasons why the demand for loanable funds is negatively related to the real interest rate.
Correct Answer:
Verified
Correct Answer:
Verified
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