What happens to the cost of borrowing funds when the demand for loans declines?

Financial Markets and Funds MCQs for PPSC, FPSC, NTS, and Pakistan government job tests. Select an option below, then read the explanation.

PPSCFPSCNTSPakistan govt jobs
Subject
Financial Markets and Fundsfinance-mcqs › financial-markets-and-funds
Published
12 May 2023
Last updated
28 May 2026

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Explanation

When the demand for loanable funds drops, the cost to borrow money tends to decrease because lenders compete to attract fewer borrowers, leading to lower interest rates.

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