a. If the demand for loanable funds by the business sector decreases because of a recession and the demand for loanable funds by government increases by an amount greater than the decreased demand. How is the equilibrium interest rate affected? Use diagram to show the change. b. Suppose investors expect inflation to fall in the future. How this expected fall in inflation affects the nominal interest rate? Illustrate your answer by using loanable funds diagrams. c. Why should a rise in the price level cause interest rates to rise when the nominal money supply is fixed?