Question

146. Refer to the above diagram. A government-set maximum permissible interest rate is best illustrated by:

A. price B.
B. quantity E.
C. price C.
D. price A.

Answer 1

The government-set maximum permissible interest rate is best illustrated by a price ceiling, which creates a shortage of loans.

Step-by-step explanation:

The government-set maximum permissible interest rate is best illustrated by a price ceiling.

In the given diagram, if the government sets a maximum interest rate, it would create a price ceiling below the equilibrium interest rate.

At the price ceiling, the quantity demanded exceeds the quantity supplied, leading to excess demand or a shortage of loans.