What are the factors that change saving and shift the supply of loanable funds curve?
What will be an ideal response?
There are three main factors that change saving and shift the supply of loanable funds curve: disposable income, wealth, and the expected future income. The higher the disposable income, the more people save, so an increase in disposable income shifts the supply of loanable funds curve rightward. The higher wealth, the less people save because households feel richer and do not see the need to save. Thus an increase in wealth shifts the supply of loanable funds curve leftward. Finally, the higher the expected future income, the less people save today. Thus an increase in the expected future income shifts the supply of loanable funds curve leftward.
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