Asked by oluwatosin babalola on May 14, 2024
Verified
The equilibrium interest rate equates:
A) nominal and real interest rates.
B) the quantities demanded and supplied of loanable funds.
C) consumption and saving.
D) taxes and government spending.
Equilibrium Interest Rate
The interest rate at which the quantity of loanable funds demanded equals the quantity of loanable funds supplied.
Loanable Funds
refers to the pool of funds available for borrowing, consisting of savings made available to borrowers in the financial markets.
Quantities Demanded
The total amount of a good or service that consumers wish to purchase at any given price level.
- Develop an understanding of the basic aspects of interest rates, how the time value of money impacts financial decisions, and the balance of supply and demand for loanable funds.
Verified Answer
MB
Madelyn BerryMay 18, 2024
Final Answer :
B
Explanation :
The equilibrium interest rate is determined by the intersection of the demand and supply of loanable funds in the market. At this point, the quantity demanded and supplied of loanable funds are equal. Therefore, choice B is the correct answer.
Learning Objectives
- Develop an understanding of the basic aspects of interest rates, how the time value of money impacts financial decisions, and the balance of supply and demand for loanable funds.