Suppose that businesses initially hire private guards. Then subsequently the government provides free police protection, which substitutes for the private guards. Assume that the private guards and public police are equally efficient and receive the same wage rates. How does the switch from private to public protection affect measured real GDP

When a shortage or a surplus arises in the loanable funds market a. the supply of loanable funds changes to return the economy to its original real interest rate b. the nominal interest rate is pulled to the new equilibrium level c. the demand for loanable funds changes to return the economy to its original real interest rate d. the real interest rate is pulled to the new equilibrium level