When lenders and borrowers are satisfied the financial markets will clear at
A) the treasury bill rate of interest.
B) the equilibrium rate of interest.
C) the federal funds rate of interest.
D) several different rates of interest under certainty.

Question

Quizplus · Accepted Answer

The equilibrium rate of interest represents the point at which lenders and borrowers are satisfied, and thus the financial market will clear at this rate. It is the rate at which the demand for funds (borrowers) equals the supply of funds (lenders). The other options may be relevant in certain contexts, but do not necessarily represent the clearing of the financial market.

When Lenders and Borrowers Are Satisfied the Financial Markets Will