Final answer:
The slope of the demand for loanable funds curve represents the negative relation between the real interest rate and investment. This demonstrates how interest rates affect investment demand. The elasticity of savings and its effect on the supply of financial capital also correlates with interest rates.
Step-by-step explanation:
The slope of the demand for loanable funds curve represents the negative relation between the real interest rate and investment. This means that as interest rates increase, the quantity of loanable funds demanded for investment purposes decreases, and vice versa. This relationship reflects the cost of borrowing; higher interest rates make loans more expensive, thus decreasing the demand for investment, while lower rates make loans cheaper, increasing investment demand.
In contrast, the slope of the savings function represents the positive relation between the real interest rate and saving, which indicates that higher interest rates encourage more saving as the return on saved funds increases. The elasticity of savings describes the degree to which changes in interest rates affect the quantity of saving, influencing the shape of the supply curve for financial capital in financial markets.