->More savings= more supply of loan-able funds (->)
->Less savings = less supply of loan-able funds (->)
EX
-Government budget surplus = more savings= more supply Loan-able funds .: Slf -> .: v
-Decrease in consumers MPS = less saving = less supply of loan-able funds .: Slf <- .:r ^
Final Thoughts on Loan-able Funds
-Loanable funds market determines the real interest rate
-When government does fiscal policy it will affect the loan-able funds market
-Changes in the real interest rate (r%) will affect Gross Private investment.
Federal Fund Rate- the interest rate that commercial bank, change other commercial banks for over night
-Discount rate- loans form FED
-Sister banks- federal fund rate
Prime Rate- the interest rate that is given to a banks most credit worthy consumers
o-4%
when money is not available for lending, it makes more sense to talk about the supply and demand for loanable funds, which is the amount of money available for borrowing.
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