If the real interest rate were below the equilibrium real interest rate in the loanable funds market, an excess _____ for loanable funds would occur and the real interest rate would _____.
A) demand; rise
B) demand; fall
C) supply; rise
D) supply; fall

Question

Quizplus · Accepted Answer

When the real interest rate is below the equilibrium, it means that the cost of borrowing is relatively low, leading to an increase in the demand for loanable funds. As a result, the real interest rate would rise to reach a new equilibrium.

If the Real Interest Rate Were Below the Equilibrium Real