- 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 is also the demand for bonds.
Changes in the Demand for Loan-able Funds
- Remember that 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 (<-)
- 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.
No comments:
Post a Comment