Banks act as an intermediary between savers and borrowers by determining the:
A) price at which the quantity of funds saved will be equal to the quantity invested.
B) quantity of funds that will be saved depending on the price.
C) quantity of funds that will be borrowed for any given quantity of savings.
D) price at which the quantity of funds saved will be more than enough for those who want to borrow.

Question

Quizplus · Accepted Answer

Banks determine the interest rate at which savers are willing to deposit funds and the interest rate at which borrowers are willing to take out loans. Through this process, they find the equilibrium interest rate at which the quantity of funds saved will be equal to the quantity invested. This is the price at which the market for loanable funds clears.

Banks Act as an Intermediary Between Savers and Borrowers by Determining