If the demand for loanable funds shifts to the right, then the equilibrium interest rate
A)and quantity of loanable funds rise.
B)and quantity of loanable funds fall.
C)rises and the quantity of loanable funds falls.
D)falls and the quantity of loanable funds rises.

Question

Quizplus · Accepted Answer

When the demand for loanable funds shifts to the right, it indicates that more people are willing and able to borrow money. This leads to an increase in the equilibrium interest rate, as borrowers compete with one another to obtain funds. At the same time, the quantity of loanable funds available also rises as lenders are willing to supply more money at the higher interest rate. Therefore, both the interest rate and quantity of loanable funds rise.

If the Demand for Loanable Funds Shifts to the Right