Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A decrease in interest rates
B
An increase in business investment opportunities
C
A decrease in consumer confidence
D
An increase in savings rates
Understanding the Answer
Let's break down why this is correct
Answer
In the loanable funds market, an increase in the demand for loanable funds usually happens when businesses want to invest more in projects, like building new factories or buying new equipment. When companies expect to earn more money in the future, they are more likely to borrow funds to make these investments. For example, if a tech company believes that a new product will be very popular, it might seek a loan to develop and market that product. This increased borrowing leads to higher demand for funds, which can push up interest rates. Overall, when businesses feel optimistic about making profits, they drive up the demand for loans in the market.
Detailed Explanation
When businesses see good chances to invest, they want to borrow more money. Other options are incorrect because Some might think lower interest rates mean more borrowing; A drop in consumer confidence can make people less willing to spend.
Key Concepts
demand for loanable funds
Topic
Loanable Funds Market Dynamics
Difficulty
easy level question
Cognitive Level
understand
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