Question: Show the effect on the real interest rate and equilibrium quantity of loanable funds of a decrease in the demand for loanable funds and

Show the effect on the real interest rate and equilibrium quantity of loanable funds of a decrease in the demand for loanable funds and a smaller decrease in the supply of loanable funds. Draw a demand for loanable funds curve. Label it DLF. Draw a supply of loanable funds curve. Label it SLF- Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1. Draw a curve that shows a decrease in the demand for loanable funds. Label it DLF- Draw a curve that shows a smaller decrease in the supply of loanable funds. Label it SLF. Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2. 12.0 10.0 8.0 6.0 4.0 Real interest rate (percent per year) 2.04 0.04 0.0 1.0 2.0 3.0 4.0 5.0

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