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20 May, 05:45

If the demand for loanable funds shifts to the left, then the equilibrium interest rate a. and quantity of loanable funds falls. b. and quantity of loanable funds rises. c. rises and the quantity of loanable funds falls. d. falls and the quantity of loanable funds rises.

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  1. 20 May, 06:20
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    The correct answer is option a.

    Explanation:

    When there is a leftward shift in the demand curve for loan-able funds, there will be excess supply of funds. The equilibrium interest rate will fall. There will also be a decline in the quantity of loan-able funds.

    The graph given below shows the market for loan-able funds.

    The x axis represents quantity of loan-able funds while the Y axis represents interest rate. When the demand curve moves from D to D', the interest rate falls from R to R'. The quantity of funds also declines from Q to Q'. The equilibrium shifts from E to E'.
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