(Answered) What is the effect of decrease in business confidence on loanable fundsWhat is the effect of…

➤ When can a fall in business confidence increase the supply of loanable funds?
A confidence shock can raise precautionary saving if households fear job loss or income shocks. That increases the supply of loanable funds and shifts the supply curve right, further reducing interest rates. This effect depends on social safety nets, liquidity constraints, and whether consumers prioritize saving over consumption.