If people decide that some country is now a more risky place to keep their saving,then at the original interest rate in that country there is a
A)surplus of loanable funds,so the interest rate increases.
B)surplus of loanable funds,so the interest rate decreases.
C)shortage of loanable funds,so the interest rate increases.
D)shortage of loanable funds,so the interest rate decreases.

Question

Quizplus · Accepted Answer

When people decide that a country is a more risky place to keep their savings, they will withdraw their funds from banks and other financial institutions. This will result in a shortage of loanable funds, as there will be less money available for banks to lend out. As a result, the interest rate will increase to attract funds back into the market. Therefore, the best choice is C- shortage of loanable funds, so the interest rate increases.

If People Decide That Some Country Is Now a More