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9 November, 05:14

The slope of the demand for loanable funds curve represents the ...

a. positive relation between the real interest rate and saving.

b. negative relation between the real interest rate and investment.

c. negative relation between the real interest rate and saving.

d. positive relation between the real interest rate and investment.

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Answers (1)
  1. 9 November, 05:17
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    Answer: c. negative relation between the real interest rate and saving.

    Explanation: Savings belong to what an economy saves from its income, which in turn represents national savings. We also have the investment and the net capital flow. The balance is reached when the amount of savings equals investment and net capital flows or demand for loanable flows.

    Therefore, we can say that the demand is negative when interest rates rise, since this retracts the economy and decreases the savings and thus the money available to lend.
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