An increase in the demand for loanable funds causes
A) the price of securities to rise.
B) interest rates to rise.
C) the supply of securities to shift to the left.
D) the demand for securities to shift to the right.

Question

Quizplus · Accepted Answer

An increase in the demand for loanable funds leads to a higher demand for borrowing money, causing interest rates to rise since lenders will charge higher rates when the demand is high. Therefore, option B is correct. Option A is incorrect because an increase in the demand for loanable funds is not related to the price of securities. Option C is incorrect because an increase in the demand for loanable funds does not affect the supply of securities. Option D is incorrect because an increase in the demand for loanable funds does not directly change the demand for securities.

An Increase in the Demand for Loanable Funds Causes