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As the real interest rate rises, the quantity of loanable funds: supplied also rises supplied is unchanged demanded also rise
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Answer #1

1. As the real interest rate rises, cost of borrowing loanable funds also increases. And, therefore the Quantitity demanded for loanable funds decreases. However, increased real interest rate will encourage you to save more because now you can get more return on supply of loanable funds. So, the Quantitity supplied will increase.

Answer: option A

2. The supply curve in the loanable funds model is upward sloping which shows a positive relationship between real interest rate and the quantity of loanable funds supplied.

Answer: A

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