If the real interest rate is greater than the equilibrium real interest rate,________.

Question

Quizplus · Accepted Answer

When the real interest rate is greater than the equilibrium real interest rate, it means that the cost of borrowing is high enough that the quantity of credit demanded falls short of the quantity of credit supplied, resulting in a surplus of credit. To bring the market back to equilibrium, the interest rates will tend to decrease, which would then increase the quantity of credit demanded by borrowers. Therefore, option C is the correct answer.

If the Real Interest Rate Is Greater Than the Equilibrium