Which of the Following Explains Why the Demand for Loanable

question 146

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 and hence 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 and hence undertaken.
• D) All of the above are correct reasons why the demand for loanable funds is negatively related to the real interest rate.

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