Tuesday, April 11, 2017

Loan-able Funds Market

Is an interest rate of 50% good or bad?
Bad for borrowers but good for lenders
The loanable funds market is the private setor supply and demand of loans.

  • This market brings together those who want to lend money and those who want to borrow.
This market shows the effect on REAL INTEREST RATE

Image result for demand and supply

Demand - inverse relationship between real interest rate and quantity loans demanded
Supply - Direct relationship between real interest rate and quantity loans supplied
This is NOT the same as the money market. (Supply is not vertical)
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1 comment:

  1. UnknownMay 19, 2017 at 6:15 AM

    I enjoyed the image because it shows the relationship between supply and demand. It shows that only one or the other can increase at one time.

    ReplyDelete

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