Question

The demand for loanable funds increases while the supply of loanable funds remains constant. This would cause:

Answer 1

Both the equilibrium interest rate and the equilibrium quantity of funds will increase

Step-by-step explanation:

Loanable funds are those kinds of funds, which is aggregate sum of all the money which the entities and the people in the economy have decided to lend or save out to the borrowers for the purpose of investments instead of using it for the personal consumption.

So, when the demand increases and on the same side, the supply of these funds is constant, then both the equilibrium interest rate and the equilibrium quantity of funds will increase.