Suppose that a business discovers an opportunity that requires funds to exploit. What effect would this have in the market for loanable funds?
A)It will increase interest rates and the quantity of funds lent will rise.
B)It will decrease interest rates and the quantity of funds lent will rise.
C)It will increase interest rates and the quantity of funds lent will fall.
D)It will decrease interest rates and the quantity of funds lent will fall.

Question

Quizplus · Accepted Answer

When a business discovers an opportunity requiring funds, it increases the demand for loanable funds. This higher demand, in turn, pushes up the interest rates and increases the quantity of funds lent as lenders are incentivized to offer more funds at higher rates.

Suppose That a Business Discovers an Opportunity That Requires Funds