Savings and investment are equal:
A) at equilibrium in the market for loanable funds.
B) when banks regulate their flow.
C) at the interest rate set by the Fed.
D) when banks operate according to government regulations.

Question

Quizplus · Accepted Answer

At equilibrium in the market for loanable funds, the supply of savings and the demand for investment are equal, resulting in an equilibrium interest rate. Therefore, savings and investment are equal at this point. Banks regulating their flow, the interest rate set by the Fed, and government regulations on banks may affect the supply and demand of loanable funds but do not necessarily ensure that savings and investment are equal.

Savings and Investment Are Equal