The actions of borrowers and lenders are coordinated by
A) the interest rate in the loanable funds market.
B) the government in the resources market.
C) businesses in the resources market.
D) the interest rate in the goods and services market.

Question

Quizplus · Accepted Answer

The interest rate in the loanable funds market serves as a signal to borrowers and lenders about the availability and cost of funds. As the interest rate increases, borrowing becomes more expensive and lending becomes more attractive, leading to a decrease in borrowing and an increase in lending. Conversely, as the interest rate decreases, borrowing becomes cheaper and lending becomes less attractive, leading to an increase in borrowing and a decrease in lending. Therefore, the actions of borrowers and lenders are coordinated by the interest rate in the loanable funds market.

The Actions of Borrowers and Lenders Are Coordinated by