00:01
Suppose the equilibrium interest rate is 5%.
00:03
If the current interest rate is 7%, which of the following is true? okay, so the important thing to remember here is that if the interest rate is set at a higher rate than the equilibrium rate, right? so as in this case where 7 % is greater than 5%, so in this case we see that what tends to happen, we have more money supplied.
00:47
We have a larger supply essentially than is demanded.
00:54
So we have more money being supplied than it is being demanded.
01:04
So what does this mean? so looking at the answer choices, a said that banks will have more deposits than they will be able to loan out, so they won't be able to loan out as much is essentially what that says.
01:18
B says borrowers will want to borrow more money than is available for loans, so we established that that is not true.
01:25
We we have plenty of loans available...