If the government imposes an interest rate ceiling below the equilibrium interest rate in the loanable funds market, then

Question

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When the government imposes an interest rate ceiling below the equilibrium interest rate, it creates a shortage of loanable funds. This means that the quantity of savings supplied (which represents the supply of loanable funds) will be less than the quantity of loanable funds demanded. This is because at the lower interest rate, more borrowers will demand funds, while fewer savers will be willing to supply funds. As a result, some borrowers will be unable to obtain the funds they need, leading to inefficiencies in the market.

If the Government Imposes an Interest Rate Ceiling Below the Equilibrium