How does an increase in the demand for loanable funds, driven by businesses seeking to invest, affect interest rates in the context of the role of financial intermediaries and monetary policy adjustments?

When businesses want to invest more, they often seek loans, which increases the demand for loanable funds. This higher demand typically leads to an increase in interest rates because lenders can charge more when many borrowers are competing for the same money. Financial intermediaries, like banks, play a key role by collecting deposits and lending money, so they adjust their rates based on the demand they see. If interest rates rise, it can also lead to a response from monetary policy, where central banks might change their policies to influence the money supply and stabilize the economy. For example, if a bank sees many businesses applying for loans, it may raise its interest rates to balance the demand, making borrowing more expensive.