If the Real Interest Rate Is Below Equilibrium, Which of the Following

question 55

Multiple Choice

If the real interest rate is below equilibrium, which of the following is likely to occur?

• A)​Lenders will raise their interest rates which will encourage saving.
• B)​Lenders will raise their interest rates which will encourage borrowing.
• C)​Lenders will lower their interest rates which will encourage saving.
• D)​Lenders will lower their interest rates which will encourage borrowing.

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Definitions:

Total Consumer Surplus

The total benefit received by consumers in a market transaction, measured as the difference between what consumers are willing to pay and what they actually pay.

Price Ceiling

A government-imposed limit on how high the price of a good or service can be charged, usually intended to protect consumers.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, typically illustrated as the area above the supply curve and below the market price.