What Changes Will a Shortage of Loanable Funds Induce in a Savings-Investment

question 91

Multiple Choice

What changes will a shortage of loanable funds induce in a savings-investment diagram in a closed economy?

• A) The demand for loanable funds curve will shift right, so the interest rate will rise.
• B) The supply of loanable funds curve will shift left, so the interest rate will fall.
• C) There will be no shifts of the curves, but the interest rate will rise.
• D) There will be no shifts of the curves, but the interest rate will fall.

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Definitions:

Incompatible

Unable to exist or work together without conflict.

Intrinsic Rewards

The personal satisfaction and pleasure derived from accomplishing a task or learning new skills, independent of external rewards.

Extrinsic Motivation

Motivation driven by external rewards, such as money or praise, rather than by the inherent enjoyment or interest in the task itself.

Intrinsic Motivation

The drive to engage in activities for the inherent satisfaction or pleasure derived from the activity itself, rather than for some external reward.