The primary function of interest rates is to

Question

Quizplus · Accepted Answer

Interest rates are the price that borrowers pay to lenders for the use of money. As such, they allocate the supply of loanable funds by encouraging or discouraging borrowing and lending. When interest rates are higher, borrowing becomes more expensive, which can lead to a decrease in demand for loans and an increase in the supply of loanable funds. Conversely, when interest rates are lower, borrowing becomes cheaper, which can lead to an increase in demand for loans and a decrease in the supply of loanable funds.

The Primary Function of Interest Rates Is to