The demand and supply of loanable funds increase simultaneously.This would cause the:

Question

Quizplus · Accepted Answer

When both demand and supply of loanable funds increase simultaneously, the equilibrium interest rate will be affected by both factors. However, it is uncertain whether the equilibrium interest rate will increase, decrease, or remain the same because the magnitude of the change in demand and supply could differ, making it difficult to predict the net effect on interest rates. The equilibrium quantity of loanable funds, on the other hand, will increase because both demand and supply have increased. Therefore, the answer is C, where the equilibrium quantity of loanable funds will increase, but the effect on the equilibrium interest rate would be uncertain.

The Demand and Supply of Loanable Funds Increase Simultaneously