Interest rates would __________ if the supply of loanable funds decreased.

Name: Interest rates would __________ if the supply of loanable funds decreased.
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Question

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When the supply of loanable funds decreases, lenders have less money to lend out to borrowers. As a result, borrowers may have to compete for the limited funds available by offering higher interest rates to lenders in order to secure the loan. This increase in competition and demand for funds leads to a rise in interest rates.

Interest Rates Would __________ If the Supply of Loanable Funds