The ________ rate of interest is the rate that balances the supply of savings and the demand for investment funds.

Question

Quizplus · Accepted Answer

The equilibrium rate of interest refers to the interest rate at which the amount of savings equals the demand for investment funds. At this interest rate, the supply and demand for loanable funds are in balance. Therefore, D) Equilibrium is the most appropriate answer. A) Nominal refers to the stated interest rate, B) Real considers the effect of inflation on the interest rate, and C) Risk-free refers to the interest rate on a risk-free investment.

The ________ Rate of Interest Is the Rate That Balances