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29 October, 08:48

The election of a new president resulted in a significant increase in business confidence regarding the economy. how will this new confidence impact the loanable funds market in the short run? demand for loanable funds / real interest rate increase / increase increase / decrease increase / no change decrease / decrease decrease / increase

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  1. 29 October, 12:06
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    The answer is Increase/Increase

    As people and businesses become more confident in the economy, they will want to invest more. They will also not be afraid to take out a loan and develop a new unit or buy new land since they are optimistic about the economy and are expect good years ahead.

    In the case real interest rates, they will also increase. As businesses and individuals are more confident they will want to invest rather than save money.

    While interests rates were pretty low in the last few years to encourage investment, the government will gradually move away from this policy.
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