Explain and show graphically how an increase in household saving affects the equilibrium interest rate and the equilibrium quantity of loanable funds

What will be an ideal response?


An increase in household saving increases the supply of loanable funds, shifting the supply curve for loanable funds to the right, as shown below. The increase in the supply of loanable funds results in a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds.

Economics

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