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

Question

Quizplus · Accepted Answer

If there is a surplus of loanable funds, the quantity demanded is less than the quantity supplied, which means that there are more funds available than there are borrowers willing to borrow. When supply exceeds demand, the price (in this case, the interest rate) tends to fall in order to entice more borrowers to take out loans. Therefore, the correct answer is D - the quantity demanded is less than the quantity supplied, and the interest rate will fall.

If There Is a Surplus of Loanable Funds, Which of the Following