Investment Demand in the Loanable Funds Market
Private firms expect lower returns on their investment projects during an economic downturn. How would this expectation be reflected in the Loanable Funds Market graph?
A
The supply of loanable funds shifts left, causing a rise in the equilibrium interest rate and a reduction in available funds.
B
The supply of loanable funds shifts right, thereby reducing the equilibrium interest rate and increasing available funds.
C
The demand for loanable funds shifts right, leading to an increase in both the real interest rate and the volume of funds exchanged.
D
The demand for loanable funds shifts left, which decreases both the equilibrium real interest rate and the volume of funds borrowed.
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