The loanable funds theory states that interest rates are a function of the supply of and demand for loanable funds.

Question

Quizplus · Accepted Answer

The loanable funds theory, also known as the market for loanable funds, explains that interest rates are determined by the supply of and demand for loanable funds in the credit market. As the supply of funds increases relative to demand, interest rates decrease, and vice versa. Therefore, the statement is true.

The Loanable Funds Theory States That Interest Rates Are a Function