In the market for loans an interest rate above market equilibrium will

Question

Quizplus · Accepted Answer

An interest rate above market equilibrium means that the interest rate is higher than the interest rate that balances the supply and demand in the market. This creates a surplus of funds as there are more lenders than borrowers. To reduce the surplus and bring the market back to equilibrium, the interest rates must be lowered. Lower interest rates incentivize more borrowers to take out loans, increasing demand and reducing the surplus. Therefore, option B is the correct answer.

In the Market for Loans an Interest Rate Above Market