If the current market interest rate for loanable funds is above the equilibrium level, what would we expect to happen?
A) Because there is a surplus of loanable funds, the interest rate will rise.
B) Because there is a shortage of loanable funds, the interest rate will rise.
C) Because there is a shortage of loanable funds, the interest rate will fall.
D) Because there is a surplus of loanable funds, the interest rate will fall.

Question

Quizplus · Accepted Answer

When the current market interest rate for loanable funds is above the equilibrium level, it indicates a surplus of loanable funds. In such a scenario, lenders lower interest rates to encourage borrowing, leading to a decrease in the interest rate towards the equilibrium.

If the Current Market Interest Rate for Loanable Funds Is