Learning Path
Question & Answer
Choose the Best Answer
reserve requirements
interest rates
total reserves
loan supply
Understanding the Answer
Let's break down why this is correct
When more borrowers want money, banks raise interest rates to decide who gets the limited funds. Other options are incorrect because People sometimes think banks change the amount they must keep in reserve when loan demand rises; Some think that if many loans are taken, banks will hold more total reserves.
Key Concepts
Loanable Funds Market Analysis
easy level question
understand
Deep Dive: Loanable Funds Market Analysis
Master the fundamentals
Definition
Loanable Funds Market Analysis involves examining how changes in demand for loans impact real interest rates in response to shifts in investor optimism or pessimism about future business conditions. By analyzing graphs and understanding the relationship between loan demand and interest rates, economists can predict market reactions to economic uncertainties.
Topic Definition
Loanable Funds Market Analysis involves examining how changes in demand for loans impact real interest rates in response to shifts in investor optimism or pessimism about future business conditions. By analyzing graphs and understanding the relationship between loan demand and interest rates, economists can predict market reactions to economic uncertainties.
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