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 loanable funds. 10 Supply Demand Percent) INTEREST RATE( Demand 2 100 200 300 400 500 600 700 800 900 1000 LOANABLE FUNDS (Billions of dollars) is the source of the supply of loanable funds. As the interest rate rises, the quantity of loanable funds supplied than the quantity of loans Suppose the interest rate is 4.5 %. Based on the previous graph, the quantity of loanable funds supplied is the interest rates they charge, thereby of loanable funds. This would encourage lenders to demanded, resulting in a the quantity of loanable funds demanded, moving the market toward the quantity of loanable funds supplied and the equilibrium interest rate of INTEREST RATE un