ii. Suppose the demand for investment increases by RM 0.2 billion at every interest rate, show the effect of these changes on the real interest rate and quantity of loanable funds on your graph.

iii. Suppose the supply of loanable funds increases by RM 0.2 billion, show the effect of these changes on the real interest rate and quantity of loanable funds on your graph.

B. Discuss the reason why the demand for loanable funds slopes downward and the supply of loanable funds slopes upward.

Table below shows the market for loanable funds for an imaginary country..... [12 Marks] Real interest Quantity of loanable Rate (%) 1 2 3 4 5 Quantity of loanable funds demanded (RM billion) funds supplied (RM billion) 1.4 1.3 1.2 1.1 1.0 0.8 1.0 1.2 1.3 1.4 Graph the market for loanable fund of this economy based on the data above. Determine the equilibrium quantity of loanable funds. (4 Marks)