If there is a surplus of loanable funds, the quantity demanded is
A)greater than the quantity supplied and the interest rate will rise.
B)greater than the quantity supplied and the interest rate will fall.
C)less than the quantity supplied and the interest rate will rise.
D)less than the quantity supplied and the interest rate will fall.

Question

Quizplus · Accepted Answer

When there is a surplus of loanable funds, it means that the quantity supplied (the amount of funds available for loans) exceeds the quantity demanded (the amount of loans borrowers want to take out) at the current interest rate. This surplus puts downward pressure on the interest rate, causing it to fall until equilibrium is reached.

If There Is a Surplus of Loanable Funds, the Quantity