Answer to Question #228745 in Macroeconomics for `azsxdcfvgbhnjmk,

Question

Suppose there is an excess demand of loanable funds. Which of the following adjustments will occur to restore equilibrium in that market?  

       

(i)   The real interest rate will decrease.

(ii)  The quantity of loanable funds demanded will rise.

(iii)   The real interest rate will increase.

(iv)   The quantity of loanable funds supplied will fall.

Only (ii) and (iii) are correct.

Only (iii) is correct.

Only (i) and (iv) are correct.

Only (iii) and (iv) are correct.

Answer 1

Only (iii) is correct

The real interest rate increase will make the demand to reduce as the ones paying the loans will also generate more income to balance the supply with the demand.