If the amount of money to be lent is exactly equal to the amount desired to be borrowed then the market is cleared at:
A) the equilibrium interest rate.
B) the marginal rate of substitution.
C) the crossover rate.
D) the short term yield curve rate.

Question

Quizplus · Accepted Answer

The market is cleared at the equilibrium interest rate when the amount of money to be lent is exactly equal to the amount desired to be borrowed. This is because the equilibrium interest rate is the price at which the supply of loanable funds equals the demand for loanable funds.

If the Amount of Money to Be Lent Is Exactly