If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, there is a
A)shortage and the interest rate is below the equilibrium level.
B)surplus and the interest rate is above the equilibrium level.
C)surplus and the interest rate is below the equilibrium level.
D)shortage and the interest rate is above the equilibrium level.

Question

Quizplus · Accepted Answer

When the quantity of loanable funds demanded exceeds the quantity supplied, it indicates a shortage in the market. This situation occurs when the interest rate is below the equilibrium level, as lower interest rates increase the demand for loans while decreasing the supply.

If the Quantity of Loanable Funds Demanded Exceeds the Quantity