If the real interest rate is above the equilibrium real interest rate,
A)lenders are unable to find borrowers willing to borrow all of the available funds and the real interest rate rises.
B)a shortage of loanable funds exists.
C)lenders are unable to find borrowers willing to borrow all of the available funds and the real interest rate falls.
D)borrowers are unable to borrow all of the funds they want to borrow and the real interest rate rises.
E)borrowers are unable to borrow all of the funds they want to borrow and the real interest rate falls.

Question

Quizplus · Accepted Answer

When the real interest rate is above the equilibrium, it means the cost of borrowing is higher than what many borrowers are willing to pay, leading to an excess supply of loanable funds. As a result, lenders lower the interest rate to attract more borrowers, causing the real interest rate to fall towards equilibrium.

If the Real Interest Rate Is Above the Equilibrium Real