Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increased savings by households
B
Higher government borrowing
C
Decrease in interest rates
D
Increased inflation
Understanding the Answer
Let's break down why this is correct
Answer
In the loanable funds market, several factors can increase the supply of loanable funds, which means more money is available for borrowing. One key factor is an increase in savings. When people save more money, banks and financial institutions have more funds to lend out. For example, if a community encourages saving through higher interest rates on savings accounts, more people might deposit their money, leading to a larger pool of funds that banks can use to give loans. This increase in supply can help lower interest rates, making it cheaper for borrowers to get loans.
Detailed Explanation
When households save more money, they have extra funds to lend. Other options are incorrect because Many think that when the government borrows more, it increases funds available; Some believe lower interest rates mean more funds are available.
Key Concepts
financial markets.
Topic
Loanable Funds Market Dynamics
Difficulty
easy level question
Cognitive Level
understand
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