The equilibrium real interest rate is determined by the
A)demand for loanable funds curve and the supply of loanable funds curve.
B)supply of loanable funds curve and financial institutions.
C)banks and insurance companies.
D)demand for loanable funds curve and real GDP.
E)government expenditure curve and the taxation curve.

Question

Quizplus · Accepted Answer

The equilibrium real interest rate is determined by the intersection of the demand for loanable funds curve and the supply of loanable funds curve. The demand for loanable funds comes from individuals and firms that want to borrow money, while the supply of loanable funds comes from individuals and firms that want to save their money. The equilibrium real interest rate is the rate at which the quantity of loanable funds demanded is equal to the quantity of loanable funds supplied.

The Equilibrium Real Interest Rate Is Determined by the