Assume the market for loanable funds is in equilibrium at 5% interest.Assuming that firms become more pessimistic about future profits,all else being equal:
A) the equilibrium interest rate would rise and the equilibrium quantity would fall.
B) both the equilibrium interest rate and the equilibrium quantity would rise.
C) both the equilibrium interest rate and the equilibrium quantity would fall.
D) the equilibrium interest rate would fall and the equilibrium quantity would rise.
E) the equilibrium real rate of interest would become negative and the equilibrium quantity would remain unchanged.
Correct Answer:
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