Real rate of interest R D1 S D2 Quantity of loanable funds Assume that the market for loanable funds is in equilibrium at the rate of interest shown at point 'R' and the quantity of panable funds, 'Q,' as shown in the accompanying graph. If there is an increase in productivity due to technological nnovation, then what impact will this have on the demand for loanable funds, ceteris paribus? The demand for loanable funds will increase, and the demand curve will shift to D2. O The demand for loanable funds will decrease, and the demand curve will shift to D1. O The demand for loanable funds will remain constant, and the demand curve will remain at D. O The demand for loanable funds will become zero, and the demand curve should be vertical in shape. The demand for loanable funde will infinitely increase and the demand curve will be horizontal

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Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.