If the real interest rate is below equilibrium, which of the following is likely to occur?
A)Lenders will raise their interest rates which will encourage saving.
B)Lenders will raise their interest rates which will encourage borrowing.
C)Lenders will lower their interest rates which will encourage saving.
D)Lenders will lower their interest rates which will encourage borrowing.

Question

If the real interest rate is below equilibrium, which of the following is likely to occur?
A)​Lenders will raise their interest rates which will encourage saving.
B)​Lenders will raise their interest rates which will encourage borrowing.
C)​Lenders will lower their interest rates which will encourage saving.
D)​Lenders will lower their interest rates which will encourage borrowing.

Quizplus · Accepted Answer

When the real interest rate is below equilibrium, lenders are likely to raise their interest rates to balance supply and demand in the loan market. Higher interest rates make saving more attractive relative to borrowing, which helps to restore equilibrium.

If the Real Interest Rate Is Below Equilibrium, Which of the Following