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Answer 3:
Since the expansion of the airline industry requires large amount of financing, as the demand for airline travel increases, the demand for loanable funds in the market will also increase to finance for the greater demand for airline travel. This will shift the demand for loanable funds rightwards to D'D' and thus new equilibrium occurs at point E2 where rate of interest in the loanable fund market increases to Oi2 and equilibrium level of savings and investment also increases in the economy. This is depicted in the graph above.
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