During the financial crisis in 2007 and 2008, financial institutions believed that default risks were higher. As a result, there was in the supply of loanable funds and a in the real interest rate.

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During the financial crisis, there was a decrease in the supply of loanable funds as investors and lenders became more risk-averse. This led to an increase in the real interest rate, as borrowers had to pay more interest to compensate lenders for the higher default risk.

During the Financial Crisis in 2007 and 2008, Financial Institutions