The loanable funds market in Country Z is in equilibrium.

(a) Draw a correctly labeled graph of the loanable funds market showing the equilibrium real interest rate and the equilibrium quantity of loanable funds.

(b) Assume household savings in Country Z increases.

(i) Will this cause a shortage or a surplus in the loanable funds market at the current equilibrium real interest rate?

(ii) On your graph in part (a), show the effect of the increase in household savings on the equilibrium real interest rate.

(c) Based on your answer to part (b)(ii), will lenders be better off or worse off?

(d) Based on your answer to part (b)(ii), what will happen to investment spending in Country Z? Explain.