!"#$%&'()*+((,#-./01(2/-&3%4&/%1(#/5(%"&(6./#/7.

#8(,93%&4

:;&3%.</3(=<'(>&-.&?+((@/3?&'3

12 34*(56/"/$6"7(808'*-98(#%7*(68('%(4*7.(-"'$4(%/*(.*#8%/98(8":6/;(<6'4("/%'4*#(.*#8%/98
6/:*8'-*/'2((3<%(-"#=*'8('4"'("#*(."#'(%5('4*(56/"/$6"7(808'*-("#*('4*(>%/?(-"#=*'@
'4#%&;4(<46$4(7"#;*($%#.%#"'6%/8@('4*(5*?*#"7(;%:*#/-*/'@(%#(8'"'*("/?(7%$"7
;%:*#/-*/'8(>%##%<@("/?('4*(8'%$=(-"#=*'@('4#%&;4(<46$4($%#.%#"'6%/8(8*77(%</*#846.
84"#*82((3<%(56/"/$6"7(6/'*#-*?6"#6*8("#*(>"/=8@(<46$4('"=*(6/(?*.%86'8("/?(&8*('4*
?*.%86'8('%(-"=*(7%"/8@("/?(-&'&"7(5&/?8@(<46$4(8*77(84"#*8('%('4*(.&>76$("/?(&8*('4*
.#%$**?8('%(>&0("(.%#'5%76%(%5(56/"/$6"7("88*'82

A2 B"'6%/"7(8":6/;(68('4*("-%&/'(%5("(/"'6%/98(6/$%-*('4"'(68/9'(8.*/'(%/($%/8&-.'6%/(%#
;%:*#/-*/'(.&#$4"8*82((C#6:"'*(8":6/;(68('4*("-%&/'(%5(6/$%-*('4"'(4%&8*4%7?8(4":*
7*5'("5'*#(."06/;('4*6#('"D*8("/?(."06/;(5%#('4*6#($%/8&-.'6%/2((C&>76$(8":6/;(68('4*
"-%&/'(%5('"D(#*:*/&*('4"'('4*(;%:*#/-*/'(4"8(7*5'("5'*#(."06/;(5%#(6'8(8.*/?6/;2((34*
'4#**(:"#6">7*8("#*(#*7"'*?(>*$"&8*(/"'6%/"7(8":6/;(*E&"78(.#6:"'*(8":6/;(.7&8(.&>76$
8":6/;2

F2 G/:*8'-*/'(#*5*#8('%('4*(.&#$4"8*(%5(/*<($".6'"7@(8&$4("8(*E&6.-*/'(%#(>&67?6/;82((G'(68
*E&"7('%(/"'6%/"7(8":6/;(>0("/("$$%&/'6/;(6?*/'6'02

H2 I($4"/;*(6/('4*('"D($%?*('4"'(-6;4'(6/$#*"8*(.#6:"'*(8":6/;(68('4*(6/'#%?&$'6%/(%5("
$%/8&-.'6%/('"D('%(#*.7"$*('4*(6/$%-*('"D2((J6/$*("($%/8&-.'6%/('"D(<%&7?/9'('"D('4*
#*'&#/8('%(8":6/;@(6'(<%&7?(6/$#*"8*('4*(8&..70(%5(7%"/">7*(5&/?8@('4&8(7%<*#6/;(6/'*#*8'
#"'*8("/?(6/$#*"86/;(6/:*8'-*/'2

K2 I(;%:*#/-*/'(>&?;*'(?*56$6'("#68*8(<4*/('4*(;%:*#/-*/'(8.*/?8(-%#*('4"/(6'(#*$*6:*8
6/('"D(#*:*/&*2((J6/$*("(;%:*#/-*/'(>&?;*'(?*56$6'(#*?&$*8(/"'6%/"7(8":6/;@(6'(#"68*8
6/'*#*8'(#"'*8@(#*?&$*8(.#6:"'*(6/:*8'-*/'@("/?('4&8(#*?&$*8(*$%/%-6$(;#%<'42

A'<B8&43(#/5(@$$8.7#%.</3+((@/3?&'3

12 "2 34*(>%/?(%5("/(*"8'*#/(L&#%.*"/(;%:*#/-*/'(<%&7?(."0("(46;4*#(6/'*#*8'(#"'*
'4"/('4*(>%/?(%5('4*(M2J2(;%:*#/-*/'(>*$"&8*('4*#*(<%&7?(>*("(;#*"'*#(#68=(%5
?*5"&7'2

!"#$%&#'()#"$*(+(,%-."/0
25/13-1
 >2 I(>%/?('4"'(#*."08('4*(.#6/$6."7(6/(ANAK(<%&7?(."0("(46;4*#(6/'*#*8'(#"'*('4"/("
>%/?('4"'(#*."08('4*(.#6/$6."7(6/(ANNK(>*$"&8*(6'(4"8("(7%/;*#('*#-('%(-"'&#6'0@
8%('4*#*(68(-%#*(#68=('%('4*(.#6/$6."72

$2 I(>%/?(5#%-("(8%5'<"#*($%-."/0(0%&(#&/(6/(0%&#(;"#";*(<%&7?(."0("(46;4*#
6/'*#*8'(#"'*('4"/("(>%/?(5#%-(,%$"O,%7"(>*$"&8*(0%&#(8%5'<"#*($%-."/0(4"8
-%#*($#*?6'(#68=2

?2 I(>%/?(688&*?(>0('4*(5*?*#"7(;%:*#/-*/'(<%&7?(."0("(46;4*#(6/'*#*8'(#"'*('4"/("
>%/?(688&*?(>0(B*<(P%#=(J'"'*(>*$"&8*("/(6/:*8'%#(?%*8/9'(4":*('%(."0(5*?*#"7
6/$%-*('"D(%/('4*(>%/?(5#%-(B*<(P%#=(J'"'*2

A2 "2 P%&9?(*D.*$'('4*(06*7?($&#:*('%(>*(&.<"#?(87%.6/;(>*$"&8*('4*#*98(-%#*(#68=(%/
7%/;*#('*#-(>%/?82

>2 Q*/*#"770@('4*($&#:*(0%&(?#"<(<677(>*(&.<"#?(87%.6/;@(*D$*.'(6/('6-*8(%5
-%/*'"#0('6;4'*/6/;(%#(*"#70(6/("(#*$*886%/2

F2 34*(8'%$=(-"#=*'(?%*8(4":*("(8%$6"7(.&#.%8*2((R6#-8(%>'"6/(5&/?8(5%#(6/:*8'-*/'(>0
688&6/;(/*<(8'%$=2((C*%.7*("#*(-%#*(76=*70('%(>&0('4"'(8'%$=(>*$"&8*('4*#*("#*(%#;"/6S*?
8'%$=(-"#=*'8@(8%(.*%.7*(=/%<('4*0($"/(8*77('4*6#(8'%$=(65('4*0(<"/'('%2

H2 J'%$=(.#6$*8("#*(:6*<*?("8(4"#>6/;*#8(%5(5&'&#*(?*$76/*8(6/(#*"7(QTC(>*$"&8*(.*%.7*
5%#*8**('4"'(%&'.&'(<677(>*(7%<*#@(8%($%#.%#"'*(.#%56'8(<677(>*(7%<*#@(8%(8'%$=8("#*/9'
<%#'4("8(-&$42

K2 34*("?:"/'";*(%5(%</6/;("(?6:*#8*(.%#'5%76%(%5(8'%$=8("/?(>%/?8(#"'4*#('4"/(4%7?6/;
8'%$=8(%#(>%/?8(5#%-("(86/;7*($%-."/0(68('4"'(6'(#*?&$*8(#68=2((C*%.7*(<4%(%</("
?6:*#8*(.%#'5%76%(%5(8'%$=8("/?(>%/?8(5"$*(7*88(#68=(>*$"&8*('4*0(4":*(%/70("(8-"77(8'"=*
6/(*"$4($%-."/02((J%-*%/*(<4%(%</8(8'%$=8(%#(>%/?8(5#%-("(86/;7*($%-."/0(5"$*8("
7%'(%5(#68=(>*$"&8*('4*6#(#*'&#/(68('6*?(*/'6#*70('%('4*(8&$$*88(%5('4*(%/*($%-."/02

U2 ,%-."/6*8(*/$%&#";*('4*6#(*-.7%0**8('%(4%7?(8'%$=(6/('4*($%-."/0(>*$"&8*(6'(;6:*8('4*
*-.7%0**8('4*(6/$*/'6:*('%($"#*(">%&'('4*(56#-98(.#%56'8@(/%'(V&8'('4*6#(%</(8"7"#02(
34*/@(65(*-.7%0**8(8**(<"8'*(%#(8**("#*"8(6/(<46$4('4*(56#-($"/(6-.#%:*@('4*0977('"=*
"$'6%/8('4"'(>*/*56'('4*($%-."/0(>*$"&8*('4*0(=/%<('4*(:"7&*(%5('4*6#(8'%$=(<677(#68*("8
"(#*8&7'2((I/?(6'("78%(;6:*8(*-.7%0**8("/("??6'6%/"7(6/$*/'6:*('%(<%#=(4"#?@(=/%<6/;
'4"'(65('4*(56#-(?%*8(<*77@('4*0(<677(.#%56'2

)&'(5#%-("/(*-.7%0**98(.%6/'(%5(:6*<@(%</6/;(8'%$=(6/('4*($%-."/0(5%#(<46$4(84*(%#
4*(<%#=8($"/(>*(#68=02((34*(*-.7%0**98(<";*8(%#(8"7"#0("#*("7#*"?0('6*?('%(4%<(<*77
'4*(56#-(.*#5%#-82((G5('4*(56#-(4"8('#%&>7*@('4*(*-.7%0**($%&7?(>*(7"6?(%55(%#(4":*(4*#

!"#$%&#'()#"$*(+(,%-."/0
25/13-2
 %#(468(8"7"#0(#*?&$*?2((G5('4*(*-.7%0**(%</8(8'%$=(6/('4*(56#-@('4*/('4*#*98("(?%&>7*
<4"--0W'4*(*-.7%0**(68(&/*-.7%0*?(%#(;*'8("(7%<*#(8"7"#0("/?('4*(:"7&*(%5('4*(8'%$=
5"778("8(<*772((J%(%</6/;(8'%$=(6/(0%&#(%</($%-."/0(68("(:*#0(#68=0(.#%.%86'6%/2((X%8'
*-.7%0**8(<%&7?(>*(>*''*#(%55(?6:*#86506/;W%</6/;(8'%$=(%#(>%/?8(6/(%'4*#
$%-."/6*8W8%('4*6#(5%#'&/*8(<%&7?/9'(?*.*/?(8%(-&$4(%/('4*(56#-(5%#(<46$4('4*0
<%#=2(

Y2 G5(*:*#0%/*(>*76*:*8('4*(.#%56'8(%5("(56#-(<677(#68*(6/('4*(5&'&#*@('4*/('4*(56#-98(8'%$=
.#6$*(<677(>*(46;4(#*7"'6:*('%(6'8($&##*/'(*"#/6/;8@(8%('4*(.#6$*O*"#/6/;8(#"'6%(<677(>*
46;4*#('4"/(6'(68(5%#(%'4*#($%-."/6*82((34*(?68"?:"/'";*(%5(>&06/;(8&$4(8'%$=(68('4"'(65
'4%8*(5&'&#*(.#%56'8(?%/9'(-"'*#6"76S*@('4*(46;4(.#6$*O*"#/6/;8(#"'6%(-*"/8('4*(8'%$=(68
%:*#:"7&*?@("/?(0%&977(;*'("(7%<*#O'4"/O":*#";*(#*'&#/(%/(0%&#(6/:*8'-*/'2

Z2 3%("(-"$#%*$%/%-68'@(8":6/;(%$$&#8(<4*/("(.*#8%/98(6/$%-*(*D$**?8(4*#($%/8&-.'6%/@
<467*(6/:*8'-*/'(%$$&#8(<4*/("(.*#8%/(%#(56#-(.&#$4"8*8(/*<($".6'"7@(8&$4("8("(4%&8*
%#(>&86/*88(*E&6.-*/'2

"2 [4*/(0%&#(5"-670('"=*8(%&'("(-%#';";*("/?(>&08("(/*<(4%&8*@('4"'98
6/:*8'-*/'@(>*$"&8*(6'98("(.&#$4"8*(%5(/*<($".6'"72

>2 [4*/(0%&(&8*(0%&#(\ANN(."0$4*$=('%(>&0(8'%$=(6/(I3+3@('4"'98(8":6/;@
>*$"&8*(0%&#(6/$%-*(%5(\ANN(68/9'(>*6/;(8.*/'(%/($%/8&-.'6%/(;%%?82

$2 [4*/(0%&#(#%%--"'*(*"#/8(\1NN("/?(?*.%86'8(6'(6/(4*#("$$%&/'("'("(>"/=@('4"'98
8":6/;@(>*$"&8*('4*(-%/*0(68/9'(8.*/'(%/($%/8&-.'6%/(;%%?82

?2 [4*/(0%&(>%##%<(\1@NNN(5#%-("(>"/=('%(>&0("($"#('%(&8*(6/(0%&#(.6SS"O?*76:*#0
>&86/*88@('4"'98(6/:*8'-*/'@(>*$"&8*('4*($"#(68("($".6'"7(;%%?2((

]2 "2 G5(6/'*#*8'(#"'*8(6/$#*"8*@('4*($%8'8(%5(>%##%<6/;(-%/*0('%(>&67?('4*(5"$'%#0
>*$%-*(46;4*#@(8%('4*(#*'&#/8(5#%-(>&67?6/;('4*(/*<(.7"/'(-"0(/%'(>*(8&556$6*/'
'%($%:*#('4*($%8'82((34&8(46;4*#(6/'*#*8'(#"'*8(-"=*(6'(7*88(76=*70('4"'(G/'*7(<677
>&67?('4*(/*<(5"$'%#02

>2 L:*/(65(G/'*7(&8*8(6'8(%</(5&/?8('%(56/"/$*('4*(5"$'%#0@('4*(#68*(6/(6/'*#*8'(#"'*8
8'677(-"''*#82((34*#*98("/(%..%#'&/6'0($%8'(%/('4*(&8*(%5('4*(5&/?82((G/8'*"?(%5
6/:*8'6/;(6/('4*(5"$'%#0@(G/'*7($%&7?(6/:*8'('4*(-%/*0(6/('4*(>%/?(-"#=*'('%(*"#/
'4*(46;4*#(6/'*#*8'(#"'*(":"67">7*('4*#*2((G/'*7(<677($%-."#*(6'8(.%'*/'6"7(#*'&#/8
5#%-(>&67?6/;('4*(5"$'%#0('%('4*(.%'*/'6"7(#*'&#/8(5#%-('4*(>%/?(-"#=*'2((J%(65
6/'*#*8'(#"'*8(#68*@(8%('4"'(>%/?(-"#=*'(#*'&#/8(#68*@(G/'*7(68(";"6/(7*88(76=*70('%
6/:*8'(6/('4*(5"$'%#02

!"#$%&#'()#"$*(+(,%-."/0
25/13-3
1N2 "2 R6;&#*(AKO1(677&8'#"'*8('4*(*55*$'(%5('4*(\AN(>6776%/(6/$#*"8*(6/(;%:*#/-*/'
>%##%<6/;2((G/6'6"770@('4*(8&..70(%5(7%"/">7*(5&/?8(68($&#:*(J @('4*(*E&676>#6&-
#*"7(6/'*#*8'(#"'*(68(6 @("/?('4*(E&"/'6'0(%5(7%"/">7*(5&/?8(68(^ 2((34*(6/$#*"8*(6/
;%:*#/-*/'(>%##%<6/;(>0(\AN(>6776%/(#*?&$*8('4*(8&..70(%5(7%"/">7*(5&/?8(5%#
*"$4(6/'*#*8'(#"'*(>0(\AN(>6776%/@(8%('4*(/*<(8&..70($&#:*@(J @(68(84%</(>0("
8465'('%('4*(7*5'(%5(J (>0(*D"$'70(\AN(>6776%/2((I8("(#*8&7'(%5('4*(8465'@('4*(/*<
*E&676>#6&-(#*"7(6/'*#*8'(#"'*(68(6 2((34*(6/'*#*8'(#"'*(4"8(6/$#*"8*?("8("(#*8&7'(%5
'4*(6/$#*"8*(6/(;%:*#/-*/'(>%##%<6/;2

S2

S1
Interest Rate

i2
i1

Demand
L1 − 20 L2 L1
Loanable Funds

>2 J6/$*('4*(6/'*#*8'(#"'*(4"8(6/$#*"8*?@(6/:*8'-*/'("/?(/"'6%/"7(8":6/;(?*$76/*("/?
.#6:"'*(8":6/;(6/$#*"8*82((34*(6/$#*"8*(6/(;%:*#/-*/'(>%##%<6/;(#*?&$*8(.&>76$
8":6/;2((R#%-('4*(56;&#*(0%&($"/(8**('4"'('%'"7(7%"/">7*(5&/?8(_"/?('4&8(>%'4
6/:*8'-*/'("/?(/"'6%/"7(8":6/;`(?*$76/*(>0(7*88('4"/(\AN(>6776%/@(<467*(.&>76$
8":6/;(?*$76/*8(>0(\AN(>6776%/("/?(.#6:"'*(8":6/;(#68*8(>0(7*88('4"/(\AN(>6776%/2(

$2 34*(-%#*(*7"8'6$(68('4*(8&..70(%5(7%"/">7*(5&/?8@('4*(57"''*#('4*(8&..70($&#:*
<%&7?(>*@(8%('4*(6/'*#*8'(#"'*(<%&7?(#68*(>0(7*88("/?('4&8(/"'6%/"7(8":6/;(<%&7?
5"77(>0(7*88@("8(R6;&#*(AKOA(84%<82

?2 34*(-%#*(*7"8'6$('4*(?*-"/?(5%#(7%"/">7*(5&/?8@('4*(57"''*#('4*(?*-"/?($&#:*
<%&7?(>*@(8%('4*(6/'*#*8'(#"'*(<%&7?(#68*(>0(7*88("/?('4&8(/"'6%/"7(8":6/;(<%&7?
5"77(>0(-%#*@("8(R6;&#*(AKOF(84%<82

*2 G5(4%&8*4%7?8(>*76*:*('4"'(;#*"'*#(;%:*#/-*/'(>%##%<6/;('%?"0(6-.76*8(46;4*#
'"D*8('%(."0(%55('4*(;%:*#/-*/'(?*>'(6/('4*(5&'&#*@('4*/(.*%.7*(<677(8":*(-%#*(8%
'4*0($"/(."0('4*(46;4*#(5&'&#*('"D*8@(8%(.#6:"'*(8":6/;(<677(6/$#*"8*@("8(<677('4*

!"#$%&#'()#"$*(+(,%-."/0
25/13-4
 8&..70(%5(7%"/">7*(5&/?82((3468(<677(%558*'('4*(#*?&$'6%/(6/(.&>76$(8":6/;@('4&8
#*?&$6/;('4*("-%&/'(>0(<46$4('4*(*E&676>#6&-(E&"/'6'0(%5(6/:*8'-*/'("/?
/"'6%/"7(8":6/;(?*$76/*@("/?(#*?&$6/;('4*("-%&/'('4"'('4*(6/'*#*8'(#"'*(#68*82((G5
'4*(#68*(6/(.#6:"'*(8":6/;(<"8(*D"$'70(*E&"7('%('4*(6/$#*"8*(6/(;%:*#/-*/'
>%##%<6/;@('4*#*(<%&7?(>*(/%(8465'(6/('4*(/"'6%/"7(8":6/;($&#:*@(8%(6/:*8'-*/'@
/"'6%/"7(8":6/;@("/?('4*(6/'*#*8'(#"'*(<%&7?("77(>*(&/$4"/;*?2((3468(68('4*($"8*(%5
a6$"#?6"/(*E&6:"7*/$*2

Inelastic Supply Elastic Supply

S2 S1

S2
i2 S1
i2
i

i
i1
i1

D D
L2 L1 L2 L1
L L

Inelastic Demand Elastic Demand

S2
S1
S2
i2 S1
i

i2
i1
i1
D

D
L2 L1 L2 L1
L L

112 J6/$*(/*<($%-.&'*#('*$4/%7%;0(*/">7*8(56#-8('%(#*?&$*(6/:*/'%#0(6/:*8'-*/'@('4*
?*-"/?($&#:*(5%#(7%"/">7*(5&/?8(8465'8('%('4*(7*5'@("8(84%</(6/(R6;&#*(AKOH2((I8("
#*8&7'@('4*(*E&676>#6&-(E&"/'6'0(%5(7%"/">7*(5&/?8(?*$76/*8@("8(?%*8('4*(6/'*#*8'(#"'*2(

!"#$%&#'()#"$*(+(,%-."/0
25/13-5
 34*(?*$76/*(6/('4*(6/'*#*8'(#"'*('4*/(6/$#*"8*8(6/:*8'-*/'(6/(5"$'%#6*8("/?(*E&6.-*/'@
>&'(%:*#"77(6/:*8'-*/'(8'677(?*$76/*82((

Supply

Interest Rate i1
i2

D1
D2
L2 L1
Loanable Funds

1A2 G5(<%#7?(8":6/;8(?*$76/*8("'('4*(8"-*('6-*(<%#7?(6/:*8'-*/'(#68*8@('4*(8&..70($&#:*(%5
7%"/">7*(5&/?8(8465'8('%('4*(7*5'("/?('4*(?*-"/?($&#:*(8465'8('%('4*(#6;4'2((R6;&#*(AKOK
677&8'#"'*8('4*(#*8&7'('4"'('4*(<%#7?(6/'*#*8'(#"'*(<677(#68*@(<467*('4*(%:*#"77(*55*$'(%/('4*
*E&676>#6&-(E&"/'6'0(%5(7%"/">7*(5&/?8(68("->6;&%&8W6'(?*.*/?8(%/(4%<(>6;('4*(8465'8
%5('4*('<%($&#:*8("#*(#*7"'6:*('%(*"$4(%'4*#("/?(%/('4*6#(*7"8'6$6'6*82

Supply
Interest Rate

i1
i2

D1
D2
L2 L1
Loanable Funds

!"#$%&#'()#"$*(+(,%-."/0
25/13-6
1F2 "2 G/:*8'-*/'($"/(>*(6/$#*"8*?(>0(#*?&$6/;('"D*8(%/(.#6:"'*(8":6/;(%#(>0(#*?&$6/;
'4*(;%:*#/-*/'(>&?;*'(?*56$6'2(()&'(#*?&$6/;('"D*8(%/(.#6:"'*(8":6/;(4"8('4*
*55*$'(%5(6/$#*"86/;('4*(;%:*#/-*/'(>&?;*'(?*56$6'@(&/7*88(8%-*(%'4*#('"D*8("#*
6/$#*"8*?(%#(;%:*#/-*/'(8.*/?6/;(68(#*?&$*?2((J%(6'(68(?6556$&7'('%(*/;";*(6/(>%'4
.%76$6*8("'('4*(8"-*('6-*2

>2 3%(=/%<(<46$4(%5('4*8*(.%76$6*8(<%&7?(>*("(-%#*(*55*$'6:*(<"0('%(#"68*
6/:*8'-*/'@(0%&9?(/**?('%(=/%<b((_1`(<4"'('4*(*7"8'6$6'0(%5(.#6:"'*(8":6/;(68(<6'4
#*8.*$'('%('4*("5'*#O'"D(#*"7(6/'*#*8'(#"'*@(86/$*('4"'(<%&7?(?*'*#-6/*(4%<(-&$4
.#6:"'*(8":6/;(<%&7?(6/$#*"8*(65(0%&(#*?&$*?('"D*8(%/(8":6/;c(_A`(4%<(.#6:"'*
8":6/;(#*8.%/?8('%($4"/;*8(6/('4*(;%:*#/-*/'(>&?;*'(?*56$6'@(86/$*@(5%#
*D"-.7*@(65(a6$"#?6"/(*E&6:"7*/$*(4%7?8@('4*(?*$76/*(6/('4*(;%:*#/-*/'(>&?;*'
?*56$6'(<%&7?(>*(-"'$4*?(>0("/(*E&"7(?*$76/*(6/(.#6:"'*(8":6/;@(8%(/"'6%/"7
8":6/;(<%&7?/9'(6/$#*"8*("'("77c("/?(_F`(4%<(*7"8'6$(6/:*8'-*/'(68(<6'4(#*8.*$'('%
'4*(6/'*#*8'(#"'*@(86/$*(65(6/:*8'-*/'(68(E&6'*(6/*7"8'6$@(/*6'4*#(.%76$0(<677(4":*
-&$4(%5("/(6-."$'(%/(6/:*8'-*/'2

!"#$%&#'()#"$*(+(,%-."/0
25/13-7