If the demand for loans decreases due to investors anticipating a recession, what is the likely effect on the real interest rates in the loanable funds market?

When the demand for loans decreases, it means that fewer people and businesses want to borrow money. In the loanable funds market, this lower demand can lead to a decrease in real interest rates, which are the rates adjusted for inflation. When lenders see that fewer borrowers are interested, they might lower the interest rates to encourage more people to take out loans. For example, if many businesses decide to hold off on expanding during a recession, banks may reduce their rates to attract borrowers. Overall, lower demand for loans typically leads to lower interest rates, making borrowing cheaper for those who still want loans.