In the market for loanable funds, if the interest rate is above the equilibrium level
A)wealth increases.
B)a shortage of loanable funds exists.
C)a surplus of loanable funds exists.
D)expected profit falls.
E)government expenditure decreases.

Question

Quizplus · Accepted Answer

When the interest rate is above the equilibrium level, it means that the price of borrowing is higher than what many borrowers are willing to pay, and lenders are supplying more funds than borrowers demand. This leads to a surplus of loanable funds.

In the Market for Loanable Funds, If the Interest Rate