At the equilibrium of the market for loanable funds, the marginal rate of return is just equal to the

Question

Quizplus · Accepted Answer

At the equilibrium of the market for loanable funds, the marginal rate of return equals the market rate of interest, which is also the rate of return on the last profitable project undertaken by society. This is because, at equilibrium, the cost of borrowing (interest rate) matches the return on the last investment made, ensuring that all profitable investments up to that point have been funded.

At the Equilibrium of the Market for Loanable Funds, the Marginal