Question

Which of the following is correct?

a. In a closed economy, equilibrium in the market for loanable funds occurs where saving = investment.
b. Investment is the source for the supply of loanable funds.
c. If there is a surplus in the market for loanable funds, the interest rate rises.
d. All of the above are correct

Answer 1

Answer is option a, i.e. In a closed economy, the equilibrium in the market for loanable funds occurs where saving = investment.

Step-by-step explanation:

Only option a is correct in the above given question. In relation to other options we have the following explanation:

Option b → Savings are the source for the supply of loanable funds.

Option c → If there is a surplus in the market for loanable funds, the interest rate falls and do not rise.

Therefore, the only correct option is option a.