A decrease in the demand for capital will lead to a decrease in the demand for loanable funds and an increase in the interest rate.
Interest rate is that the quantity charged over and on top of the principal quantity by the loaner from the receiver. Interest rates on borrowings and deposits could defer considering the aim and to whom the number is given.
The demand for loanable funds is decreasing because the rate will increase. From the purpose of read of a receiver (the supply of demand within the loanable funds framework), as interest rates increase, the price of borrowing goes up and also the person (or business) is having less chances to borrow.
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