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4. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy.


4. Supply and demand for loanable funds 


The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loan funds

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 _______ is the source of the demand for loanable funds. As the interest rate falls, the quantity of loanable funds demanded _______ 

 Suppose the interest rate is 4.5%. Based on the previous graph, the quantity of loanable funds supplied is _______ than the quantity of loans demanded, resulting in a _______  of loanable funds. This would encourage lenders to _______  the interest rates they charge, thereby _______  the quantity of loanable funds supplied and _______  the quantity of loanable funds demanded, moving the market toward the equilibrium interest rate of %_______ .


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