___________________ states that interest rates are a function of the supply and demand for loanable funds.
A) The expectations theory
B) The market segmentation theory
C) The liquidity preference theory
D) The loanable funds theory

Question

Quizplus · Accepted Answer

The loanable funds theory states that interest rates are determined by the supply and demand for loanable funds, such as savings and investments. This theory suggests that if there is high demand for loanable funds, then interest rates will increase, and if there is a surplus of loanable funds, then interest rates will decrease.

___________________ States That Interest Rates Are a Function of the Supply