Monday, April 3, 2017

4/3/17: Loanable Funds Market


  • Loanable Funds Market
    • The loanable funds market is the private sector supply & demand of loans.
      • This market brings together those who want to lend money (savers) & those who want to borrow (firms w/ investment spending projects)
      • This market shows the effect on real interest rate
      • Demand: Inverse relationship between real interest rate & quantity loans demanded.
      • Supply: Direct relationship between real interest rate & quantity loans supplied.
      • This is NOT the same as the money market (supply is not vertical).
  • Prime Rate
    • Interest rate that banks charge their most credit worthy customers.

        •
      • Better credit, better rate

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