Market interest rates are determined by

Question

Quizplus · Accepted Answer

Market interest rates are determined by the interaction of demand for and supply of loanable funds. The more demand there is for borrowing, the higher interest rates will be because lenders have more bargaining power. Conversely, the more supply there is of loanable funds (i.e. savings), the lower interest rates will be because lenders must compete more aggressively to attract borrowers. Therefore, both factors (demand and supply) must be considered together to determine market interest rates. While banks and Wall Street influence the supply and demand of loanable funds, they do not singularly determine interest rates.

Market Interest Rates Are Determined by