Which of the following best describes an equilibrium in the loanable funds market?

Choose 1 answer:
(A) The real interest rate has adjusted until public savings and private savings are equal to each other.
(B) The real interest rate has adjusted until less savings are supplied than borrowers want to borrow.
(c) The real interest rate has adjusted until the quantity of savings supplied is equal to the quantity of borrowing demanded.
(D) The real interest rate has adjusted until more savings are supplied than borrowers want to borrow.
(E) The real interest rate has adjusted until the quantity of money supplied is equal to the quantity of money that people want to hold.

Question

Which of the following best describes an equilibrium in the loanable funds market?

Choose 1 answer:
(A) The real interest rate has adjusted until public savings and private savings are equal to each other.
(B) The real interest rate has adjusted until less savings are supplied than borrowers want to borrow.
(c) The real interest rate has adjusted until the quantity of savings supplied is equal to the quantity of borrowing demanded.
(D) The real interest rate has adjusted until more savings are supplied than borrowers want to borrow.
(E) The real interest rate has adjusted until the quantity of money supplied is equal to the quantity of money that people want to hold.

Accepted Answer

∻Solution by Steps∻ ‖ step 1 ⋮ To determine the correct description of equilibrium in the loanable funds market, we need to understand the basic principle that at equilibrium, the quantity supplied of loanable funds must equal the quantity demanded. ‖ ‖ step 2 ⋮ The real interest rate is the price that equilibrates the supply and demand in the loanable funds market. When the real interest rate is at equilibrium, the amount of funds that savers are willing to lend equals the amount that borrowers are willing to borrow. ‖ ‖ step 3 ⋮ Reviewing the answer choices, we must identify which one correctly matches the principle that the quantity of savings supplied equals the quantity of borrowing demanded at equilibrium. ‖ ‖ step 4 ⋮ Choice (C) states that the real interest rate has adjusted until the quantity of savings supplied is equal to the quantity of borrowing demanded, which aligns with the definition of equilibrium in the loanable funds market. ‖ ∻Answer∻ ***C*** ∻Key Concept∻ ⚹Equilibrium in the loanable funds market⚹ ∻Explanation∻ ⚹Equilibrium is achieved when the real interest rate adjusts so that the quantity of savings supplied equals the quantity of borrowing demanded.◊What is the probability of randomly selecting the correct answer to the multiple-choice question related to equilibrium in the loanable funds market⍭ Generate me a similar question◊⚹

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