Which of the following is true?
A)The money market model is essentially a model that determines the short-term nominal rate of interest.
B)The money market model is essentially a model that determines the short-term real rate of interest.
C)The loanable funds model is essentially a model that determines the short-term real rate of interest.
D)The loanable funds model is essentially a model that determines the long-term nominal rate of interest.
E)The money market model is essentially a model that determines the long-term nominal rate of interest.

Question

Quizplus · Accepted Answer

The money market model is used to study the determination of the short-term nominal interest rate, which is the rate at which money can be borrowed or lent for short periods of time, typically up to one year. The loanable funds model, on the other hand, is a model of the market for loanable funds, which determines the real interest rate, i.e., the interest rate adjusted for inflation, and is used to study the determination of long-term interest rates.

Which of the Following Is True