Loan-able Funds Market
-The Market where savers and borrowers exchange funds (Qlf) at the real rate of interest (r%)
-The demand for loadable funds, or borrowing comes from households, firms, gov't and foreign sector.
-The demand for loan-able funds is in a
fact the supply of bands.
-The supply of loan-able funds of saving comes from households, firms government and the foreign sector.
-The supply of loan-able funds of saving comes from households, firms government and the foreign sector.
-The supply of loan-able funds is
also the demand for bonds.
Changes in the Demand for Loan-able Funds
-Demand for loan-able funds = borrowing (i.e supplying bonds)
->More borrowing = demand for loan-able funds (->)
->Less borrowing = less demand for loan-able funds (<-)
->More borrowing = demand for loan-able funds (->)
->Less borrowing = less demand for loan-able funds (<-)
Examples
- Government deficit spending = more borrowing = more demand for loan-able finds .: Dlf -> .: r % ^
- Less investment demand =less borrowing = less demand for loan-able funds.
- Government deficit spending = more borrowing = more demand for loan-able finds .: Dlf -> .: r % ^
- Less investment demand =less borrowing = less demand for loan-able funds.
Good information is given about the loanable funds market. Also, the examples helped further grasp my understanding of the concept of borrowing. More borrowing=an increase in demand for loanable funds, and vise versa for less borrowing. Very informative post! :)
ReplyDeleteThis written in detail but there should also be pictures.
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