A. short-term funds
B. long-term funds
C. surplus of funds
D. deficit of funds
✅ The correct answer is option C.
When interest rate is higher than equilibrium rate of borrowing loanable funds then financial system has surplus of funds. The demand for loanable funds represents the behavior of borrowers and the quantity of loans demanded. The lower the interest rate, the less expensive it is to borrow.
When interest rate is higher than equilibrium rate of borrowing loanable funds then financial system has surplus of funds. The demand for loanable funds represents the behavior of borrowers and the quantity of loans demanded. The lower the interest rate, the less expensive it is to borrow.