domestic economy. Question 15 (5 points) Suppose economic forecasts indicate that the econp-'- ,. ' soon experience a downturn and enter a recession (a) ln the market for loanable funds, identify which diagram (Diagram E or F) in Figure 3 represents the effect of the forecast of an economic recession, assuming borrowers and lenders believe the forecast is accurate. (b) Using your selected diagram in Question 15(a), illustrate and explain what happens to the equilibrium interest rate and the quantity of loanable funds? What happens to the quantity of saving? Figure 3: Loanable funds markets (Diagram E & F) Diagram E Diagram F Interest Line 1 Interest | rate Line 2 rate Line 1 R* R# R# Line 2 Line 3 Line 3 Q* Q# Loanable funds Q* Q# Loanable funds