If there is a shortage of loanable funds, then a. the quantity demanded is greater than the quantity supplied and the interest rate will rise. b. the quantity demanded is greater than the quantity supplied and the interest rate will fall. c. the quantity supplied is greater than the quantity demanded and the interest rate will rise. d. the quantity supplied is greater than the quantity demanded and the interest rate will fall.

If there is a shortage of loanable funds, then a. the quantity demanded is greater than the quantity supplied and the interest rate will rise.

Explanation:

In this case, the financial market is not in its state of equilibrium because, if there's a shortage, it means that the available loanable funds are not enough to satisfy their demand. Its price (or interest rate, in this case) is lower than its equilibrium price (remember that the market would reach its equilibrium when the demanded quantity is equal to the supplied quantity).

This shortage of loanable funds would happen if the interest rate is so low that it is attractive for the consumers, but not attractive enough for the suppliers. Therefore, the interest rate would need to increase to the equilibrium point where there is no shortage and no excess of loanable funds.