Final answer:
The statement is a. true; the nominal interest rate is indeed determined in the loanable funds market, reflecting the price of capital as determined by supply and demand without adjustment for inflation.
Step-by-step explanation:
The statement that the nominal interest rate is determined in the loanable funds market is true. In the loanable funds market, suppliers of capital (savers) provide funds to demanders of capital (borrowers), and the price at which this capital is traded is the interest rate. The nominal interest rate is the stated rate on a loan, without adjustment for the effect of inflation. It differs from the real interest rate, which is adjusted for inflation and reflects the true cost of borrowing. Therefore, understanding the relationship between nominal and real interest rates is crucial for both lenders and borrowers when engaging in financial transactions. For instance, when inflation is high, the real interest rate can be significantly lower than the nominal rate, benefiting borrowers. Conversely, in times of deflation, the real interest rate can be higher than the nominal rate, which favors lenders.