Kathleen is considering expanding her dress shop. If interest rates rise she is

less likely to expand. This illustrates why the demand for loanable funds slopes downward.
less likely to expand. This illustrates why the supply of loanable funds slopes downward.
more likely to expand. This illustrates why the supply of loanable funds slopes upward.
more likely to expand. This illustrates why the demand for loanable funds slopes upward.

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Expert Solution

Kathleen less likely to expand her business when the interest rate rises because the demand curve slopes downward for lonable funds because at a lower interest rate, firms and individuals are likely to borrow money as they can borrow it more cheaply and vice-versa. The lower cost of loans encourages a higher quantity of borrowing while the higher cost of loans discourages borrowings. Therefore, Option A is correct.

Rahul Sunny answered 1 year ago

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