If people suddenly become more willing to lend money,what happens to the equilibrium rate of interest?
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 supply of loanable funds will decrease the interest rate. This is because there are now more funds available to borrowers, which increases competition among lenders and drives down the cost of borrowing (i.e. the interest rate).

If People Suddenly Become More Willing to Lend Money,what Happens