AP Macroeconomics 4.7.4: Loanable Funds Equilibrium

Identify equilibrium in the loanable-funds market and explain excess demand or supply for funds.

[Maximum number: 1]

． If the current real interest rate in the loanable funds market is greater than the equilibrium real interest rate，which of the following is most likely to occur？

A

（A） The real interest rate will decrease，causing borrowers to decrease the quantity demanded of loanable funds．

B

（B） The real interest rate will decrease，causing savers to increase the quantity supplied of loanable funds．

C

（C） The real interest rate will decrease，causing savers to decrease the quantity supplied of loanable funds．

D

（D） The real interest rate will increase，causing savers to increase the quantity supplied of loanable funds．

E

（E） The real interest rate will increase，causing borrowers to increase the quantity demanded of loanable funds．

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MKT-4.D—Explain (using graphs as appropriate) how real interest rates adjust to restore equilibrium in the loanable funds market question 1