Macroeconomics

‭Table 3: Changes in Equilibrium in the Loanable Funds Market‬

‭Change‬

‭Change in‬ ‭Equilibrium Real‬ ‭Interest Rate‬ ‭(r.i.r*)‬

‭Change in Equilibrium‬ ‭Quantity of Loanable‬ ‭Funds (QLF*)‬

‭Example on Graph‬

‭S‬ ‭LF‬ ‭increases ↑ (shifts right)‬

‭r.i.r ↓‬

‭Q‬ ‭LF‬ ‭↑‬

‭X → W‬

‭S‬ ‭LF‬ ‭decreases ↓ (shifts left)‬

‭r.i.r ↑‬

‭Q‬ ‭LF‬ ‭↓‬

‭X → R‬

‭D‬ ‭LF‬ ‭increases ↑ (shifts right)‬

‭r.i.r ↑‬

‭Q‬ ‭LF‬ ‭↑‬

‭X → Y‬

‭D‬ ‭LF‬ ‭decreases ↓ (shifts left)‬

‭r.i.r ↓‬

‭Q‬ ‭LF‬ ‭↓‬

‭X → Z‬

‭D‬ ‭LF‬ ‭increases, S‬ ‭LF‬ ‭increases‬

‭r.i.r ↕‬ ‭(indeterminate)‬

‭Q‬ ‭LF‬ ‭↑‬

‭Indeterminate because‬ ‭change in r.i.r is‬ ‭indeterminate‬

‭D‬ ‭LF‬ ‭increases, S‬ ‭LF‬ ‭decreases‬

‭r.i.r ↑‬

‭Q‬ ‭LF‬ ‭↕‬ ‭(indeterminate)‬

‭Indeterminate because‬ ‭change in Q‬ ‭LF‬ ‭is‬ ‭indeterminate‬

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