The Loanable Funds Theory of Interest Rates Proposes That the General

Multiple Choice

The loanable funds theory of interest rates proposes that the general level of interest rates is determined by the complex interaction of two forces. Which of the below is ONE of these forces?

A) One force is that the total demand for funds by firms, governments, and households (or individuals) is negatively related to the interest rate including the government's demand.
B) One force affecting the level of the interest rate is the total supply of funds by firms, governments, banks, and individuals with rising rates causing banks to be less eager to extend more loans.
C) One force is that the total demand for funds by firms, governments, and households (or individuals) is positively related to the interest rate except the government's demand.
D) One force affecting the level of the interest rate is the total supply of funds by firms, governments, banks, and individuals with rising rates causing firms and individuals to save and lend more.