23 Millinneals are living with their parents and accepting f

23 Millinneals are living with their parents and accepting financial assistance from them for longer into their lifetimes than previous generations. As a result the parents of Millinneals have higher immediate expenses than previous generations. According to the loanable funds theory, what impact does the need for more immediate income by the parents have on the interest rate and quantity of money? Select one: a. The interest rate decreases and the quantity of money decreases. b. The interest rate increases and the quantity of money increases. c. It is impossible to tell from the information given. d. The interest rate decreases and the quantity of money increases. e. The interest rate increases and the quantity of money decreases.

Solution

Option d. The interest rate increases and the quantity of money decreases.

Because if parents will have high immediate expense than previous generation then they will save less and less amount will be deposited n banks. So banks will have shortage of loanable funds an since supply of loanable funds decreases interest rates will be high.

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