<p>A decrease in the cost of borrowing (interest rate) will case
a) the demand for loanable funds to increase.
b) the supply of loanable funds to decrease.
c) both A and B.
d) either A or B, but not both.
e) none of the above.</p>

<p>The answer is e, but why? Doesn't a decrease in the interest rate will cause people to save less, but it causes firms to invest more? Why is the answer not c?</p>

<macroeconomics>
A decrease in the cost of borrowing (interest rate) will case
Joshua Leung
# A decrease in the cost of borrowing (interest rate) will case

(Asked by: username_0 on 2019-07-02)

A decrease in the cost of borrowing (interest rate) will case
a) the demand for loanable funds to increase.
b) the supply of loanable funds to decrease.
c) both A and B.
d) either A or B, but not both.
e) none of the above.

The answer is e, but why? Doesn't a decrease in the interest rate will cause people to save less, but it causes firms to invest more? Why is the answer not c?

**Tags:** macroeconomics


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