Asked by Y. M. Hylton on Jun 02, 2024
Verified
The loanable funds theory of interest shows that interest rates on loans are determined by
A) the amount of money supply that the government has pumped into the economy.
B) agreement, explicit or tacit, among the bank lending officers.
C) supply and demand for funds available for lending.
D) government analysts and government regulation.
Loanable Funds Theory
An economic theory that suggests the market interest rate and the quantity of loanable funds are determined by the demand and supply of credit.
Interest Rates
The cost of borrowing money or the return on investments, usually expressed as a percentage.
- Understand the basic concepts of the loanable funds theory including supply and demand dynamics.
Verified Answer
ZK
Zybrea KnightJun 06, 2024
Final Answer :
C
Explanation :
The loanable funds theory posits that interest rates are determined by the supply and demand for funds available for lending, where the supply comes from savings and the demand comes from borrowers.
Learning Objectives
- Understand the basic concepts of the loanable funds theory including supply and demand dynamics.