Which of these would cause both the equilibrium interest rate and the equilibrium quantity to fall in the market for loanable funds?
A) an increase in the average income of the population
B) expectations of greater job security
C) an adjustment to building codes that make it more difficult to get government permits to build new buildings
D) expectations of greater business profits

Question

Quizplus · Accepted Answer

If building codes become more difficult to comply with, it will be more expensive for businesses to build new structures. This will lead to a decrease in the demand for loans, which will lead to a decrease in both the equilibrium interest rate and quantity. Option A could lead to an increase in the demand for loans, while B and D are not directly related to the loanable funds market.

Which of These Would Cause Both the Equilibrium Interest Rate