Asked by Anthony Rodriguez on Jun 06, 2024
Verified
Which of the following events would most likely cause the nominal interest rate to fall?
A) A decrease in the supply of loanable funds
B) An increase in the demand for loanable funds
C) An increase in the supply of loanable funds and an increase in the demand for loanable funds
D) An increase in the supply of loanable funds and a decrease in the demand for loanable funds
E) A decrease in the supply of loanable funds and an increase in the demand for loanable funds
Nominal Interest Rate
The stated interest rate on a loan or investment, not adjusted for inflation.
Loanable Funds
The money available for borrowing; the market where savers supply funds for loans to borrowers.
Supply
A relation between the price of a good and the quantity that producers are willing and able to sell per period, other things constant.
- Examine the impact of changes in the supply and demand for loanable funds on the interest rate.
Verified Answer
XR
xAlbino Rhino5xJun 10, 2024
Final Answer :
D
Explanation :
An increase in the supply of loanable funds and a decrease in the demand for loanable funds would most likely cause the nominal interest rate to fall because the greater availability of funds for lending, combined with reduced demand for borrowing, would put downward pressure on the cost of borrowing, which is reflected in lower interest rates.
Learning Objectives
- Examine the impact of changes in the supply and demand for loanable funds on the interest rate.