The market for loanable funds describes how borrowing happens. Based on the previous graph, the quantity of loanable funds supplied is than the quantity of loans demanded, resulting in a of loanable funds. The demand for loanable funds is downward-sloping. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. Loanable Funds: Market interest theory states that the demand for and supply of loanable determines the market interest rate loanable funds and interest are inversely related. In general, the quantity of loanable funds demanded is higher as interest rates fall. The Demand and Supply of Loanable Funds. d. and the demand for loanable funds is investment.Table 1. For example, a source of loanable funds for the American economy could be Chinese foreign investment. c. and the demand for loanable funds is saving. At lower interest rates, firms demand more capital and therefore more loanable funds. External sources outside of the primary economy can also supply loanable funds. The supply of loanable funds is generally upward-sloping. As the Interest rate rises, the quantity of lanabiq funds deman Supply 5 INTEREST RATE (Percent) Demand 0 0 200 000 100 300 400 500 LOANABLE FUNDS (Billions of dollars) is the source of the demand for loanable funds. The interest rate adjusts to bring the supply and demand for loanable funds into balance. Demand for Loanable Funds. The source of the supply of loanable funds a. is saving and the source of demand for loanable funds is investment. Suppose the interest rate is 4.5%. Dishoarding, or allowing liquid cash to enter the loanable funds market, is another source of these funds. As the interest rate rises, the quantity of loa of foanable funds demanded Suppose the interest rate is 3.5%. Demand for loanable funds curve.Anything that increases the amount of investment that households and. The real interest rate and how much is loaned out depends on the interaction between savings supply and investment demand. Figure 2–2 also illustrates the demand curve for loanable funds. The equilibrium interest … b. is investment and the source of demand for loanable funds is saving. Savings represent the supply while borrowing for investment represents the demand. quantity of loanable funds supplied. Economics Q&A Library is the source of the demand for loanable funds. The loanable funds market is characterized by the following demand function DLF where the demand for loanable funds curve includes only investment demand for loanable funds: r = 10 - (1/2000)Q where r is the real interest rate expressed as a percent (e.g., if r = 10 then the interest rate is 10%) and Q is the quantity a. c. The demand for loanable funds is downward sloping because of the inverse relationship between the real interest rate and the quantity of loanable funds demanded. This cash is normally idle and "safe" as a liquid asset, but a high-enough interest rate or demand for loanable funds can motivate the supplier to move this hoarded cash into the loanable funds … 14. As the interest rate rises, the quantity of loanable funds demanded . Other factors held constant, more funds are demanded as interest rates decrease (the cost of borrowing funds is lower). 6.