In the market for loanable funds,the interaction of the demand for,and supply of,loanable funds determines the equilibrium level of
A)the inflation rate.
B)gross domestic product.
C)the real interest rate.
D)the nominal interest rate.

Question

Quizplus · Accepted Answer

The demand for loanable funds is based on the amount of funds borrowers are willing to borrow at different interest rates, while the supply of loanable funds is based on the amount of funds lenders are willing to lend at different interest rates. The equilibrium level of the real interest rate is determined at the point where the demand for and supply of loanable funds intersect. Thus, the correct answer is C - the real interest rate. The inflation rate and gross domestic product are not directly determined by the demand and supply of loanable funds, and the nominal interest rate is not the equilibrium level but is instead affected by inflation and other factors.

In the Market for Loanable Funds,the Interaction of the Demand