The source of the supply of loanable funds is
A)saving,and the source of the demand for loanable funds is investment.
B)consumption,and the source of the demand for loanable funds is investment.
C)investment,and the source of the demand for loanable funds is saving.
D)the interest rate,and the source of the demand for loanable funds is saving.

Question

Quizplus · Accepted Answer

The source of the supply of loanable funds is saving because individuals and households save a portion of their income and deposit it in banks, which in turn lend out these savings to borrowers. The source of the demand for loanable funds is investment because businesses and entrepreneurs need funds to finance their investment projects such as building new factories or buying new equipment. Therefore, option A is the correct choice.

The Source of the Supply of Loanable Funds Is