In the context of the loanable funds market, if an increase in private savings is analogous to a river gaining more water flow (A), what would a decrease in the demand for loans be similar to (C)?

In the loanable funds market, when private savings increase, it’s like a river getting more water flow because there’s more money available for lending. Similarly, a decrease in the demand for loans can be compared to a drought affecting the river, where there’s less need for water. When fewer people or businesses want to borrow money, it means that there’s less demand for the funds available, which can lead to lower interest rates. For example, if a company decides not to take out a loan for expansion, this reduces the overall demand for loans, making it easier for others to borrow at lower rates. Thus, both changes impact how much money flows in the market and influence interest rates.