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Questions
Questions
Single choice

All other things being equal, a decrease in the supply for loanable funds:

Options
A.results from an increase in business circumstances and a decrease in the level of savings.
B.drives the interest rate up.
C.might not have any effect on the interest rate.
D.drives the interest rate down.
View Explanation

View Explanation

Standard Answer
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Approach Analysis
In this question, we’re looking at the effect of a decrease in the supply of loanable funds, holding other factors constant. Option 1: 'results from an increase in business circumstances and a decrease in the level of savings.' This is mixing two different forces: an increase in business confidence typically boosts investment demand, not the supply of loanable funds, while a decrease in savings would......Login to view full explanation

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