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3. Supply and demand for loanable funds The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange loanable funds, and the downward-sloping blue line represents the demand for loanable funds. LOANABLE FUNDS (Wons of doUars) line represents the supply of IS the source of the demand for loanable funds. As the Interest rate falls, the quantity of loanable funds demanded Suppose the Interest rate IS 3.5%. aased on the previous graph, the quantity of loanable funds supplied IS loans demanded, resulting In a of loanable funds. This would encourage lenders to than the quantity of the Interest rates they charge, thereby the quantity of loanable funds supplied and the quantity of loanable funds demanded, moving the Photos - ans3JPG See all photos Choices for the drop arrow lines are as follows: Dr #1: Saving, or Investment decreases, or Increases greater, or less surplus, or shortage raise, or lower increasing, or decreasing increasing. or decreasing knarket toward the equilibrium interest rate of market toward the equilibrium interest rate of