1. Let's think about the market for loanable funds. One of its examples is the market for housing loans. Let's analyze how COVID 19 affects the market for housing loans.

1) Suppose that COVID 19 causes high uncertainty in the future. How does high uncertainty in the market for housing loans affect demand and supply for housing loans? Describe in words how demand or supply or both will shift. (4 points)

2) Let's analyze how high uncertainty affects the market equilibrium interest rate and quantity of housing loans in three graphs. There may be three cases of change in market equilibrium. In each graph, label clearly a Y-axis and X-axis and market equilibrium point with numbers or variables with subscripts. Show the change in market equilibrium interest rate and quantity of loans with arrows. Summarize how both market equilibrium interest rate and quantity of loans changes for each case in words at the end. Show demand and supply of housing loans before COVID 19 as S₀and D₀and after COVID19 as S₁and D₁.(9 points)