Question

If "consumers were to decrease their saving for retirement and businesses" were to decrease borrowing for new plants and machinery, the effect on the real interest rates and the quantity of loanable funds would be

Answer 1

Answer: The supply of the loan able funds would decrease and so would it demand. It will also decrease.

Step-by-step explanation:

With the decrease in the saving for the retirement purposes, the demand of the consumers would decrease for loan able funds. If the businesses also decrease the savings for new plant and machinery, it would decrease their demand for loan able funds.

Because of the decrease in the demand, the supply of the loan able funds will also decrease. But the effect of this on the real interest rates can not be said to be in a certain manner. It is uncertain.