"When There Is a Shortage of Loanable Funds, the Real

question 148

Essay

"When there is a shortage of loanable funds, the real interest rate will increase." Explain whether the previous statement is correct or not.

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Definitions:

Prepaid Expense

Payments made in advance for goods or services to be received in the future, recorded as an asset on the balance sheet until the expense is incurred.

Interest Revenue

Income earned from the lending of money or from investments in interest-bearing accounts.

Account Payable

An amount owed by an entity to a creditor for goods and services purchased on credit; considered a short-term liability.

Account Receivable

Funds that are owed to a company by clients or customers who have received goods or services on credit.