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Questions
BFF3121 - S2 2025 Chapter 5 Review Quiz
Single choice
Ceteris paribus, a decrease in the demand for loanable funds
Options
A.drives the interest rate down
B.drives the interest rate up
C.might not have any effect on interest rates
D.results from an increase in business prospects
E.results from a decrease in the level of savings
View Explanation
Standard Answer
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Approach Analysis
To understand the effect of a decrease in the demand for loanable funds, think about the loanable funds market where the demand curve for loans represents borrowers' desired borrowing at each real interest rate, and the supply curve represents savers' desired lending.
Option 1: 'drives the interest rate down' — When demand for loanable funds falls, the demand curve shifts left. With the same supply of savings, a lower demand f......Login to view full explanationLog in for full answers
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