The equilibrium interest rate
A)allocates the available supply of loanable funds to investment projects that have high enough rates of return to justify the borrowing.
B)rises when the supply of loanable funds increases.
C)is the price paid for the use of any resource.
D)affects the size of total output but not the composition of that output.

Question

Quizplus · Accepted Answer

The equilibrium interest rate ensures that the available supply of loanable funds is allocated to those investment projects that have a rate of return high enough to justify the cost of borrowing. This process helps in efficient allocation of resources in the economy.

The Equilibrium Interest Rate