If the real interest rate is below the equilibrium real interest rate,
A)a shortage of of loanable funds exists, and the real interest rate rises.
B)lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve shifts rightward.
C)borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve shifts rightward.
D)borrowers will be unable to borrow all of the funds they want to borrow and the demand for loanable funds curve shifts leftward.
E)lenders will be unable to find borrowers willing to borrow all of the available funds and the supply of loanable funds curve shifts leftward.

Question

Quizplus · Accepted Answer

When the real interest rate is below the equilibrium, it means there is more demand for loanable funds than there is supply at that lower rate, leading to a shortage. This shortage puts upward pressure on the real interest rate, causing it to rise towards equilibrium.

If the Real Interest Rate Is Below the Equilibrium Real