The demand and supply of loanable funds decrease simultaneously.This would cause the:

Question

Quizplus · Accepted Answer

When both demand and supply of loanable funds decrease simultaneously, the equilibrium quantity of loanable funds would decrease, but the effect on the equilibrium interest rate would be uncertain. This is because the decrease in demand and supply results in a conflicting effect on the interest rate. The decrease in demand puts downward pressure on the interest rate, while the decrease in supply puts upward pressure on the interest rate. Thus, the net effect on the interest rate is uncertain.

The Demand and Supply of Loanable Funds Decrease Simultaneously