Use the following to answer question:
-(Table: Loanable Funds) Look at the table Loanable Funds. At what interest rate will the market for loanable funds be in equilibrium?

Question

Use the following to answer question: 
-(Table: Loanable Funds) Look at the table Loanable Funds. At what interest rate will the market for loanable funds be in equilibrium?

Quizplus · Accepted Answer

At an interest rate of 5%, the quantity of funds supplied (S) is equal to the quantity of funds demanded (D), meaning the market is in equilibrium. At any other interest rate, either the quantity supplied will exceed the quantity demanded (resulting in a surplus) or the quantity demanded will exceed the quantity supplied (resulting in a shortage). Therefore, the equilibrium interest rate is 5%.

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