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Macroeconomics

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Equilibrium Changes in the Loanable Funds Market

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Consider the loanable funds market in the accompanying diagram. Suppose there is an increase in business confidence across all firms in the economy. Which of the following correctly describes what will happen in this market?

A

Supply will shift right causing interest rates to fall.

B

Demand will shift right causing interest rates to rise.

C

Supply will shift left causing interest rates to rise.

D

Demand will shift left causing interest rates to fall.