Question

If consumers decide to be more frugal and save more out of their income, then this will cause O a shift in the supply curve for loanable funds to the right. O a shift in the supply curve for loanable funds to the left. O a movement to the right along the supply curve for loanable funds, O a movement to the left along the supply curve for loanable funds.

Answer 1

If consumers decide to be more frugal and save more out of their income, then this will cause a shift in the supply curve for loanable funds to the right.

Loanable funds are all of the household income that has been decided to be saved and lent out as opposed to being spent for consumption from the standpoint of savers. From the viewpoint of the borrower, loanable funds are all the assets that investors and households have chosen to borrow in order to finance new ventures.

The real interest rate and loan amount depend on the connection between savings and borrowing needs. The primary source of the market's readily available supply of loanable funds is savings. Savings from the public and private sectors are sources of loanable money. Private savings come from people and households, whereas public savings come from the government budget. 

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