The price in the loanable funds market is the:

Question

BlackTom AI · Accepted Answer

In the loanable funds market the commodity exchanged is savings (funds available for lending) and the price that equilibrates supply and demand is the real interest rate.

1) Relevant knowledge points and concepts
- Loanable funds market: a market for lending and borrowing where savers supply funds and borrowers (investors) demand funds.
- Price in a market: the variable that clears supply and demand (here, the rate paid to borrow funds).
- Nominal vs. real interest rate: nominal interest rate (i) is the money rate; real interest rate (r) adjusts for expected inflation (r ≈ i − πe) and measures the true purchasing-power cost/return of borrowing/lending.

2) Step-by-step reasoning
- Savers decide how much to save based on the return they expect; borrowers decide how much to invest based on the cost of borrowing. Both decisions are made in terms of real purchasing power (what can be consumed or invested in real goods), so the relevant price is the real return.
- The supply curve of loanable funds (savings) and the demand curve for loanable funds (investment) intersect. The value that adjusts to make quantity supplied equal to quantity demanded is the interest rate measured in real terms.
- Because these decisions concern actual goods and investment, inflation is a secondary consideration: agents care about real returns, so the market clears at the real interest rate r.

3) Calculations / intermediate steps
- If nominal rate i and expected inflation πe are known, real rate r ≈ i − πe. The loanable funds market determines r; i then adjusts given inflation expectations.

4) Why the correct answer is correct
- The real interest rate is the price of funds in terms of real goods; it directly balances saving and investment decisions.

5) Why other options are incorrect
- GDP deflator and CPI are measures of the overall price level, not the price of funds.
- Wage rate is the price of labor, not the price of loanable funds.

Conclusion: The correct answer is c. real interest rate.

The price in the loanable funds market is the:单项选择题

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