If there is surplus of loanable funds, then
A) the supply for loanable funds shifts right and the demand shifts left.
B) the supply for loanable funds shifts left and the demand shifts right.
C) neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium.
D) neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

Question

Quizplus · Accepted Answer

When there is a surplus of loanable funds, the interest rate will fall, leading to a decrease in the quantity supplied and an increase in the quantity demanded until equilibrium is reached.

If There Is Surplus of Loanable Funds, Then