Draw the graph · Macro · Loanable funds market

Firms turn pessimistic

Ddemand for loanable funds

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Ssupply of loanable funds

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Drag a curve sideways, or use its arrows. A curve you do not move is a curve you are saying stays put. Make each shift clear enough that a reader could see it.

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Demand for loanable funds shifts left. Supply of loanable funds stays put.

Firms borrow to fund investment. With fewer projects worth doing, they want to borrow less at every real interest rate, so the demand for loanable funds shifts left. Supply is unchanged. The lower interest rate moves savers down along their supply curve.

The real interest rate falls and fewer funds are borrowed.

Common mistake. Some students shift supply left because 'less money is moving.' Savers have not changed their behavior. It is the borrowers who pulled back.

More loanable funds market prompts

The government runs a deficit Households save more An investment tax credit Foreign savers lend here The government runs a surplus A consumption boom cuts saving

Go deeper

Lesson: Limits of Fiscal Policy

Every prompt here is one shift. The course chains them: a lesson on why the curve moves, a graded drawing, and spaced review that brings back the shifts you get wrong.

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