Other things the same, when the interest rate rises, (A) people would want to lend less, making the supply of loanable funds decrease. (B) people would want to lend more, making the quantity of loanable funds supplied increase. (C) people would want to lend more, making the supply of loanable funds increase. (D) people would want to lend less, making the quantity of loanable funds supplied decrease.

Question

Caden Snyder

Business

1 June, 10:10

Other things the same, when the interest rate rises, (A) people would want to lend less, making the supply of loanable funds decrease. (B) people would want to lend more, making the quantity of loanable funds supplied increase. (C) people would want to lend more, making the supply of loanable funds increase. (D) people would want to lend less, making the quantity of loanable funds supplied decrease.

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Answers (1)

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Preston Pitts · Answer 1

B) people would want to lend more, making the quantity of loanable funds supplied increase.

Explanation:

Let's analyse the question

It is asking us if people would like to offer more loan or not (lend)

and if that will increase or decrease the loans available.

If rate increase, then the capital return are higher, so it ismore profitable to lend.

This increase in the returns will defenite increasethe willingless to lend of people.

Also if more people try to lend, then the quantity of money to loan will increase as well so.

This situation is the same of any market, if price incrase, supply incerase.

In the money market rate will be the price and quantity of loanablefunds is the supply.