A decrease in household savings due to higher consumer spending will generally cause a ___________ the ___________for loanable funds.[Fill in the blank]

Question

BlackTom AI · Accepted Answer

Consider what happens when households save less because they spend more. This directly affects the supply of loanable funds, which comes from savings by households.

Option a: Rightward shift of the demand curve. This would imply that higher spending increases the demand for loanable funds, which isn’t a direct result of households saving less; it misattributes the effect to demand rather than supply. The scenario describes funds available for lending, not the borrowers’ desire to borrow.

Option b: Leftward shift of the demand curve. A leftward (decrease) in demand for loanable funds would occur if there were fewer borrowers or a reduced willingness to borrow, not simply from a change in savings by households. This option again confuses supply-side effects with demand-side changes.

Option c: Rightward shift of the supply curve. A rightward (increase) in supply would occur if households saved more or financial institutions supplied more funds, opposite to the stated scenario. Since savings decrease, supply should not increase.

Option d: Leftward shift of the supply curve. This correctly reflects the situation: lower household savings reduce the amount of funds available to lend, shifting the supply curve of loanable funds to the left. The demand curve remains unaffected by this specific household-saving change, assuming other factors held constant.

A decrease in household savings due to higher consumer spending will generally cause a _ the _for loanable funds.[Fill in the blank]Single choice

Similar Questions

Consider the Loanable Funds Model: Which of the following is consistent with the graph depicted below?

The supply of loanable funds curve is ___ sloping because _ respond to lower interest rates by ___ their quantity supplied of loanable funds.

A policy that induces people to save more shifts a. the supply of loanable funds and raises interest rates. b. the supply of loanable funds and reduces interest rates. c. the demand for loanable funds and raises interest rates. d. the demand for loanable funds and reduces interest rates.

The figure above shows the loanable funds market. The equilibrium real interest rate is , and the equilibrium quantity of loanable funds is .

An increase in people's expected future disposable income saving supply, and the supply of loanable funds curve .

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

A decrease in household savings due to higher consumer spending will generally cause a ___________ the ___________for loanable funds.[Fill in the blank]Single choice