If suddenly a 4 percent inflation rate (instead of a zero percent inflation rate) is expected by both suppliers and demanders in the loanable funds market, then

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When inflation is expected to rise, borrowers are more willing to take loans before rates increase, shifting the demand curve rightward. Lenders, expecting lower real returns, reduce supply, shifting the supply curve leftward.

If Suddenly a 4 Percent Inflation Rate (Instead of a Zero