In the market for loanable funds:

Question

Quizplus · Accepted Answer

The market for loanable funds involves the interaction between savers (individuals, households, businesses, and governments) who supply funds to the market, and borrowers (businesses and governments) who demand funds. Savers lend funds in exchange for interest payments, while borrowers use the funds to invest in projects or spend on goods and services. Therefore, option A is the correct answer. Option B is incorrect because borrowers do not buy and sell loans in this market, they borrow funds and repay them with interest. Option C is incorrect because savers do not interact to set the interest rate, rather the interest rate is determined by the supply and demand for loanable funds in the market. Option D is incorrect because borrowers do not supply funds in this market, they demand funds.

In the Market for Loanable Funds