Figure

The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves

Refer to the Figure. Which of the following movements shows the effects of households' decision to save more?

Question

Figure

The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves

Refer to the Figure. Which of the following movements shows the effects of households' decision to save more?

BlackTom AI · Accepted Answer

An increase in households’ saving raises the supply of loanable funds, so the supply curve shifts right. This increases the equilibrium quantity of loanable funds and lowers the real interest rate (movement along the demand curve to a new equilibrium).

Relevant knowledge points and concepts
- Loanable funds market: supply comes from savings, demand comes from borrowers (investment).  
- A rightward shift of the supply curve (S → S′) lowers the equilibrium interest rate r and increases the equilibrium quantity Q of loanable funds.  
- Movements between labeled points on the diagram indicate how r and Q change when either supply or demand shifts.

Step-by-step reasoning
1. Start at the initial equilibrium (Point C). At C there is a certain interest rate r_C and quantity Q_C.  
2. Households decide to save more → supply of loanable funds increases (S shifts right from S to S′).  
3. The new intersection of demand and the shifted supply is at a lower interest rate and a higher quantity of funds. That final point in the diagram is Point B. So the economy moves from C to B: r falls (r_B < r_C) and Q rises (Q_B > Q_C).

Why the correct answer is correct
- Movement from Point C to Point B corresponds exactly to a rightward shift of the supply curve with a lower equilibrium interest rate and higher quantity, which is the predicted effect of households saving more.

Why the other options are incorrect
- C to F: This would reflect a shift that raises the interest rate or reduces quantity (the opposite of increased saving), so it does not match a supply increase.  
- A to B: This describes a movement consistent with a demand change (or a different initial equilibrium) rather than the supply increase from more household saving.  
- F to A: That movement reflects a leftward shift (or a different pattern of r and Q) inconsistent with increased household saving.

Conclusion
Because increased household saving shifts supply right, lowering r and raising Q, the diagram movement that matches this effect is from Point C to Point B. This confirms the provided answer: A movement from Point C to Point B.

Figure The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves Refer to the Figure. Which of the following movements shows the effects of households' decision to save more?单项选择题

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