Multiple Choice
Which of the following explains why the demand for loanable funds is negatively related to the real interest rate?
A) Consumers are willing to spend less so they save more at higher real interest rates.
B) Interest rate flexibility in financial markets assures an equilibrium in which saving equals investment.
C) A lower real interest rate makes more investment projects profitable.
D) All of the above are reasons why the demand for loanable funds is negatively related to the real interest rate.
E) None 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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