If a surplus of loanable funds exists in the loanable funds market,the real interest rate ________ and the quantity of saving ________.

Question

Quizplus · Accepted Answer

When a surplus of loanable funds exists in the market, there is an excess supply of funds, which leads to a decrease in the real interest rate. This decrease in the interest rate, in turn, leads to a decrease in the quantity of saving, as people are less incentivized to save when they can borrow at a lower rate. Therefore, option B - falls; decreases - is the correct answer.

If a Surplus of Loanable Funds Exists in the Loanable