Final answer:
An increase in the demand function for loanable funds often results in a rise in both the equilibrium interest rate and quantity of loanable funds, while a decrease in demand can lower the equilibrium interest rate and affect the quantity of funds available for loans.
Step-by-step explanation:
The change in the demand function for loanable funds will have different effects on the equilibrium interest rate and quantity of loanable funds depending on whether the shift is towards an increase or decrease in demand. An increase in demand will typically cause both the equilibrium interest rate and the quantity of loanable funds to rise (option C), while a decrease in demand will lead to a lower equilibrium interest rate and potentially less quantity of loanable funds (option B).
Specifically, when more people want to borrow (a rise in demand) this will increase the quantity of loans made, due to higher demand at each interest rate level. Conversely, when there are more people who want to lend (a rise in supply), this can lead to an increase in the quantity of loans while potentially lowering the equilibrium interest rate due to the competitive pressure among lenders.