If Foreign Entities Save More and Businesses Become More Optimistic

question 126

Multiple Choice

If foreign entities save more and businesses become more optimistic about the future,we would correctly say that

• A) the new equilibrium quantity of loanable funds would decrease,but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.
• B) the new equilibrium quantity of loanable funds would increase,but we would be unable to tell if the new equilibrium interest rate would be higher or lower than the original.
• C) the new equilibrium quantity of loanable funds would be indeterminate,but we would be certain the new equilibrium interest rate would be higher than the original.
• D) the new equilibrium quantity of loanable funds would be indeterminate,but we would be certain the new equilibrium interest rate would be less than the original.
• E) based on this information and because both changes would affect the demand for loanable funds in the opposite way,we would be unable to say anything about the relationship of the new equilibrium interest rate and quantity to the original interest rate and quantity.

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