Which of the following statements is true about the market for loanable funds?

Which of the following statements is true about the market for loanable funds?

A. It determines the price at which funds can be loaned/borrowed

B. The nominal interest rate is on the vertical axis

C. All listed options are true

D. The demand curve represents financial investors

Answer: C. All listed options are true

Loanable funds model refers to a market that helps showcase the demand and supply of capital that will be used for lending or borrowed in an economy. The following statements are true about this market:

A. It determines the price at which funds can be loaned/borrowed: This market fixes the interest rate that forms the price of funds in the market or, in other words, establishes the equilibrium rate for borrowed money.

B. The nominal interest rate is on the vertical axis: The loanable funds market, these factors are often depicted with the help of a graphical model, whereby, the nominal interest rate is plotted on the Y axis of the graph.

D. The demand curve represents financial investors: The DD curve in the loanable funds model, DD stands for demand for loans is the curve that slopes downwards and represents the demand for funds by borrowers like business firms, households and the government who need funds for investment or consumption. Financial investors, in contrast, are the demand takers and are the providers of funds which are represented by the supply curve.