Question

Consider a loanable funds market of Pakistan. Suppose, if government want to implement the policy to provide incentives on savings by allowing people to shield their savings by opening Retirement Accounts with commercial banks. What is the effect of this policy on the market for loanable finds

Answer 1

The supply of loanable fund will increase.

Step-by-step explanation:

If the government provides incentives on the savings then the people will induce to save more. Therefore, in the loanable market, the supply of loanable funds will increase because the commercial bank uses the money which a person save in banks. Thus the supply of loanable fund will increase in the market.