A decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loans made would result from:
A) a decrease in excess reserves.
B) an increase in excess reserves.
C) a decrease in the demand for loans.
D) an increase in the demand for loans.

Question

Quizplus · Accepted Answer

An increase in excess reserves means banks have more funds available to lend, which can lead to a decrease in the interest rates to encourage borrowing and an increase in the quantity of loans made as banks seek to lend out their excess reserves.

A Decrease in the Equilibrium Interest Rate and an Increase