Use the Following Diagram to Answer the Following Questions

question 3

Multiple Choice

Use the following diagram to answer the following questions.

-Refer to Loanable Funds. Suppose the demand for loanable funds is initially D₁ and the supply of loanable funds is S. If the interest rate is currently greater than i₁, then:

• A) the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and the interest rate will rise.
• B) the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and the interest rate will decrease.
• C) the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and the interest rate will decrease.
• D) the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and the interest rate will increase.

---

Definitions:

Costume Jewelry

Fashionable jewelry made from non-precious materials, intended for temporary use with specific outfits rather than as long-term investments.

Marginal Cost

Marginal cost refers to the added expense incurred from producing one more unit of a product or service.

Marginal Benefit

The increase in satisfaction or utility experienced from the consumption or production of one additional unit of a good or service.

Market Failures

Situations where market outcomes are not efficient, often justifying government intervention.