What relationship does the supply of loanable funds illustrate?
Choose 1 answer:
(A) Borrowers respond to an increase in interest rates by borrowing more money.
(B) Individuals respond to lower interest rates by increasing the amount of money they hold.
(c) Savers respond to an increase in interest rates by saving more money.
(D) The central bank responds to higher interest rates by supplying more money.
(E) Investors respond to an increase in interest rates by investing more money.

Question

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Loanable Funds: The supply of loanable funds represents the total amount of funds that savers are willing to lend at various interest rates. ‖ ‖ b ⋮ Relationship with Interest Rates: As interest rates increase, the incentive for savers to save more money also increases because they receive a higher return on their savings. ‖ ‖ c ⋮ Correct Option: Therefore, the correct option is (C) Savers respond to an increase in interest rates by saving more money. ‖ ∻Answer∻ ⚹ (C) Savers respond to an increase in interest rates by saving more money. ⚹ ∻Key Concept∻ ⚹ Supply of Loanable Funds ⚹ ∻Explanation∻ ⚹ The supply of loanable funds illustrates how savers are influenced by changes in interest rates. Higher interest rates provide a greater return on savings, encouraging more saving. ⚹◊What impact does an increase in interest rates have on the supply of loanable funds according to the loanable funds market model in Microeconomics⍭ Generate me a similar question◊

Sia