Which of the following is likely to happen if people suddenly become more willing to lend money?
A)An increase in demand for loanable funds will increase the interest rate.
B)An increase in the supply of loanable funds will increase the interest rate.
C)An increase in the supply of loanable funds will decrease the interest rate.
D)An increase in demand for loanable funds will decrease the interest rate.
E)A simultaneous increase in both the supply of and demand for loanable funds makes it impossible to predict what will happen to the rate of interest.

Question

Quizplus · Accepted Answer

An increase in the willingness of people to lend money would mean there is an increase in the supply of loanable funds. With all other factors held constant, an increase in the supply of loanable funds will cause a decrease in the interest rate. This is because there will be more funds available for borrowing, causing lenders to lower their rates to compete for borrowers. Therefore, the correct answer is C.

Which of the Following Is Likely to Happen If People