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True or False:

The supply curve for loanable funds slopes the way it does because if interest rates are low, fewer projects will have a rate of return high enough to justify the investment.

A. True
B. False

Sagot :

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Final answer:

The supply curve for loanable funds slopes upward due to decreased lender incentives at lower interest rates, while the demand curve slopes downward as lower rates attract more borrowing. Equilibrium is reached where demand equals supply.


Explanation:

The supply curve for loanable funds slopes upward because as interest rates decrease, it becomes less attractive for lenders to provide funds for projects. This results in a lower quantity of funds supplied at lower interest rates. Conversely, the demand curve for loanable funds slopes downward as lower interest rates encourage more borrowing for investment projects.

The equilibrium interest rate is determined by the intersection of the supply and demand curves, reflecting the level at which the quantity of loanable funds demanded equals the quantity supplied.


Learn more about Loanable Funds Market here:

https://brainly.com/question/33722607


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