Ab 55 Economics Use the graph to answer the question that follows.Real rateof interestR200D1SD2Quantity ofloanable fundsAssume that the market for loanable funds is in equilibrium at the rate of interest shown at point 'R' and the quantity ofloanable funds, 'Q,' as shown in the accompanying graph. If there is an increase in productivity due to technologicalinnovation, then what impact will this have on the demand for loanable funds, ceteris paribus?O 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.The demand for loanable funds will become zero, and the demand curve should be vertical in shape.The demand for loanable funds will infinitely increase, and the demand curve will be horizontal.

The equilibrium in the money market is set up when the demand and supply are equal. The change in…

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