Asked by divine guthrie on Mar 10, 2024



Ceteris paribus, a decrease in the demand for loans

A) drives the interest rate down.
B) drives the interest rate up.
C) might not have any effect on interest rates.
D) results from an increase in business prospects and a decrease in the level of savings.

Demand for Loans

The desire or willingness of individuals or businesses to borrow money from financial institutions at given rates and terms.

  • Understand the impact of changes in supply and demand for loans on interest rates.

Verified Answer

Zachary Morris

Mar 10, 2024

Final Answer :
Explanation :
A decrease in the demand for loans means less borrowing is happening. According to the law of supply and demand, if demand decreases (with supply remaining constant), the price for the borrowed money, which is the interest rate, will decrease.