Loanable Funds Market
- The market where savers and borrowers exchange funds at the real rate of interest
- The demand for loanable funds or borrowing comes from households, firms, government and the foreign sector. The demand for loanable funds is in fact the supply of bonds.
- The supply of loanable funds or saving comes
Changes in the demand for loanable funds
- Remeber that demand for loanable funds equals borrowing
- More borrowing equals more demand for loanable funds
- Less borrowing equals less demand for loanable funds
Examples, government deficit spending equals more borrowing equals more demand for loanable funds
Less investment
Changes in the supply of loanable funds
- Remember that supply of loanable funds equals saving
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