Which of the following is true?
A)The money market model is essentially a model that determines the short-term nominal rate of interest.
B)The money market model is essentially a model that determines the short-term real rate of interest.
C)The loanable funds model is essentially a model that determines the short-term real rate of interest.
D)The loanable funds model is essentially a model that determines the long-term nominal rate of interest.

Question

Quizplus · Accepted Answer

The money market model focuses on the short-term nominal rate of interest, specifically the federal funds rate, which is the interest rate at which banks borrow and lend money to each other overnight. The loanable funds model, on the other hand, focuses on the long-term real rate of interest, which is the rate of return required by lenders in order to provide funds for investment.

Which of the Following Is True