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Question
Statistics
Posted 5 months ago
After interest rates were lowered in Hamsterville, national savings in Hamsterville decreased.
Which of the following changes would reflect what is described in the statement above?
Choose 1 answer:
(A) The supply of money decreased.
(B) The demand for money decreased.
(c) The quantity of loanable funds demanded decreased.
(D) The quantity of loanable funds supplied decreased.
(E) The supply of loanable funds decreased.
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Answer from Sia
Posted 5 months ago
Solution by Steps
step 1
Understand the economic relationship between interest rates and savings: Lower interest rates generally lead to decreased savings because the incentive to save is reduced
step 2
Apply this relationship to the context of loanable funds: In the market for loanable funds, a decrease in savings implies a decrease in the supply of loanable funds
step 3
Identify the answer choice that reflects a decrease in the supply of loanable funds: Among the given options, the one that indicates a decrease in the supply of loanable funds is the correct answer
Answer
E
Key Concept
Supply of loanable funds and savings relationship
Explanation
When national savings decrease, it means there is less money available for lending, which is reflected as a decrease in the supply of loanable funds in the market.
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