Show the effect on the real interest rate and equilibrium quantity of loanable funds of an increasean increase in the demand for loanable funds and

Show the effect on the real interest rate and equilibrium quantity of loanable funds of

an increasean increase

in the demand for loanable funds and

an even larger increasean even larger increase

in the supply of loanable funds.

Draw a demand for loanable funds curve. Label it

DLF0.

Draw a supply of loanable funds curve. Label it

SLF0.

Draw a point at the equilibrium real interest rate and quantity of loanable funds. Label it 1.

  

Draw a curve that shows

an increasean increase

in the demand for loanable funds. Label it

DLF1.

Draw a curve that shows

an even larger increasean even larger increase

in the supply of loanable funds. Label it

SLF1.

Draw a point at the new equilibrium real interest rate and quantity of loanable funds. Label it 2.

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enlarge

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