An increase in the interest rate will:
A) increase the amount of loans demanded and the amount of loans supplied.
B) decrease the amount of loans demanded and the amount of loans supplied.
C) increase the amount of loans demanded and decrease the amount of loans supplied.
D) decrease the amount of loans demanded and increase the amount of loans supplied.

Question

Quizplus · Accepted Answer

An increase in the interest rate makes borrowing more expensive, which decreases the amount of loans demanded. Conversely, higher interest rates make lending more attractive, increasing the amount of loans supplied.

An Increase in the Interest Rate Will