A stable equilibrium interest rate in the loanable funds market requires that:
A) Planned saving equals planned investment
B) Money supply equals money demand
C) Quantity of loanable funds supplied equals quantity of loanable funds demanded
D) Difference between foreign demand for loanable funds and volume of loanable funds supplied by foreigners to the domestic economy equals the difference between current exports from and imports into the domestic economy
E) All of the above

Question

Quizplus · Accepted Answer

All the statements describe conditions that contribute to a stable equilibrium interest rate in the loanable funds market. A) reflects the basic equilibrium condition in the loanable funds theory, where savings provide the supply of loanable funds and investment demands them. B) is related because the money supply and demand affect interest rates, which in turn influence the loanable funds market. C) is a direct statement of what equilibrium in the loanable funds market means. D) ties the international flow of capital to domestic equilibrium, showing how external factors can influence the balance of loanable funds through trade and investment flows.

A Stable Equilibrium Interest Rate in the Loanable Funds Market