Income levels affect the demand for money in the same way that increased household savings affect the supply of loanable funds. Thus, if A represents an increase in income leading to higher nominal interest rates, what does B represent? A:B :: C:?

In this question, we are looking at how changes in income and savings affect money demand and the supply of loanable funds. When people earn more money, they tend to want to hold more cash for spending, which increases the demand for money. This higher demand can lead to increased nominal interest rates because people are willing to pay more to access money. In the analogy provided, if A is the increase in income leading to higher interest rates, then B represents the increased demand for money that results from that higher income. Following this reasoning, C would represent a situation where increased household savings lead to a higher supply of loanable funds, which could potentially lower interest rates as more money is available to borrow.