All other things being equal, a decrease in the supply for loanable funds:

Question

BlackTom AI · Accepted Answer

In this question, we’re looking at the effect of a decrease in the supply of loanable funds, holding other factors constant.
Option 1: 'results from an increase in business circumstances and a decrease in the level of savings.' This is mixing two different forces: an increase in business confidence typically boosts investment demand, not the supply of loanable funds, while a decrease in savings would directly reduce the supply. Together, this option describes scenarios that do not coherently explain a decrease in supply; it misattributes the supply shift by pairing conflicting or irrelevant signals.
Option 2: 'drives the interest rate up.' A decrease in the supply of loanable funds means there are fewer funds available to borrowers at every interest rate. With demand relatively constant, the price of borrowing—namely the interest rate—must rise to clear the market. This reflects the standard liquidity/loanable funds framework where a leftward shift in supply pushes the equilibrium interest rate higher.
Option 3: 'might not have any effect on the interest rate.' In the classical model, reducing the supply of loanable funds is a market-shifting event that changes the equilibrium price (the interest rate). Saying there is no effect assumes perfect elasticity or an infinitely large shift in demand that absorbs the change, which is not typically the case in the basic model. It dismisses the intuitive mechanism by which scarcity of funds raises the price of borrowing.
Option 4: 'drives the interest rate down.' This contradicts the fundamental effect of a tighter supply. With fewer funds available, borrowers compete more for the same pool of funds, which bids the rate up, not down. This option reverses the causal direction and misstates the market outcome.
Overall, the reasoning shows that a decrease in the supply of loanable funds tightens the market and leads to a higher equilibrium interest rate, while the other options misrepresent the causes or the consequences of the supply shift.

All other things being equal, a decrease in the supply for loanable funds:单项选择题

类似问题

Economists use _____ as a model to explain how savers and borrowers come together to determine the equilibrium rate of interest.

Businesses suddenly view investment projects as riskier. All else equal, what happens?

Ceteris paribus, a decrease in the demand for loanable funds

The demand for loanable funds includes demand for i. loans. ii. stocks. iii. bonds.

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

In the long run, the interest rate is determined in the _____ market.

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单