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3 August, 17:31

If the quantity of loanable funds supplied is greater than the quantity demanded, then there is a a. surplus of loanable funds and the interest rate will rise. b. surplus of loanable funds and the interest rate will fall. c. shortage of loanable funds and the interest rate will fall. d. shortage of loanable funds and the interest rate will rise

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  1. 3 August, 17:54
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    The correct answer is letter "B": surplus of loanable funds and the interest rate will fall.

    Explanation:

    A surplus in loanable funds is caused when the quantity supplied of loans exceeds its quantity demanded. To bring levels back to equilibrium, financial institutions and in most cases the government tends to decrease the interest rate to promote the application for loans increasing at the same time consumption and private investment.
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