Question

list the factors of supply for loanable funds, and explain what would cause each of them to shift the supply curve rightward

Answer 1

Supply of loanable funds basically comprises of public savings and private savings. Increase in either of them will increase the supply of loanable funds and will shift the supply curve to the right

One of the factor is recession. Reduced disposable income in recession implies that private saving is increased and consumption is reduced which is likely to shift the supply curve to the right. Another factor is an incentive provided to the savers such as reduction in the tax on interest income. These incentives will increase private saving and again shift the supply curve to the right.

A decline in budget deficit or an increase in budget surplus will increase public saving and will shift the supply curve to the right. Similarly, inflationary expectations also influence the supply curve. Higher expected inflation in future is likely to shift both the demand and the supply curve to the right.