acquisition of capital by demanding more loanable funds, shifting the demand curve for loanable funds to D2 in Panel (a) The interest rate thus rises to r2 Consequently, in the market for capital the demand for capital is greater and the interest rate is higher The new quantity of capital demanded is K2 on demand curve D2 Figure 13.4 Loanable Funds and the Demand for Capital The interest rate is determined in the loanable funds market, and the quantity of capital demanded varies with the interest rate Thus, events in the loanable funds market and the demand for capital are interrelated If the demand for capital increases to D2 in Panel (b), the demand for loanable funds is likely to increase as well Panel (a) shows the result in the loanable funds market—a shift in the demand curve for loanable funds from D1 to D2 and an increase in the interest rate from r1 to r2 At r2, the quantity of capital demanded will be K2, as shown in Panel (b) Changes in the Loanable Funds Market and the Demand for Capital Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 704