Answer:
A. an excess supply of loanable funds of $140 billion.
Explanation:
In the schedule above, at 8 percent interest rate the demand for loanable fund is $300 billion against a supply of loanable fund of $440 billion. the excess is $140 billion, that is ($440 billion - $300billion = $140 billion)
The sum total of savings of the household and the firms, bank credit, and hoarded funds is what is known as loanable fund.
The Classical School of Thought ignored the influence of money in the determination of interest rate. The Neoclassical School of thought modified Loanable Fund theory by introducing monetary element into the theory.
The Classical School of thought used savings schedule for the determination of interest rate while the Loanable Fund theory used supply and demand of loanable fund in determining interest rate.
The equilibrium rate of interest is determined at a point where the demand curve of loanable fund intersect the supply of curve of loanable fund.
An excess supply of loanable funds is at a point on the loanable fund schedule or graph where supply loanable fund is more than demand for loanable fund. on the other and, an excess demand for loanable fund is at a point on the loanable fund schedule or graph where demand for loanable fund is exceed supply for loanable fund.
In the schedule above, at 8 percent interest rate the demand for loanable fund is $300 billion agains a supply of loanable fund of $440 billion. the excess is $140 billion, that is ($440 billion - $300billion = $140 billion)
