If there is an excess demand for loanable funds at a given interest rate, then
A)the price of bonds will fall.
B)the price of bonds will rise.
C)the interest rate will fall.
D)the price of bonds may rise or fall depending upon the reasons for the excess demand for loanable funds.

Question

Quizplus · Accepted Answer

When there is an excess demand for loanable funds, the price of bonds typically falls because investors are willing to pay less for bonds, preferring to hold cash or other investments. This is because the interest rates are expected to rise to equilibrate the demand and supply for loanable funds, making new bonds issued at higher rates more attractive.

If There Is an Excess Demand for Loanable Funds at a Given