If the demand for loanable funds increases, what will happen to real interest rates and the economic growth?

Real Interest Rates / Economic Growth

a. Increase / Increase

b. Increase / Decrease

c. Decrease / No Change

d. Decrease / Decrease

e. Decrease / Increase

As demand for loanable funds increases, interest rates will certainly increase. However, I am not sure if Economic growth will increase or decrease. As demand for funds increases, the output should increase and hence answer could be (a). However, as interest rates increase, investment spending - a key factor in economic growth - will decrease, and hence economic growth could decrease. So, answer could be b). What is the correct answer?