Overview
The loanable funds market is a critical component of the economy, where borrowers and lenders interact to set interest rates and determine the availability of funds. Understanding this market helps individuals and businesses make informed financial decisions, as interest rates directly affect borrow...
Key Terms
Example: Banks provide loanable funds to individuals and businesses.
Example: A 5% interest rate means you pay 5% more than you borrowed.
Example: As interest rates rise, more savings are supplied.
Example: Lower interest rates increase the demand for loans.
Example: At equilibrium, the amount of funds supplied equals the amount demanded.
Example: Increased government debt can make loans more expensive for businesses.
Related Topics
Monetary Policy
The process by which the central bank manages money supply and interest rates.
intermediateInvestment Analysis
Evaluating potential investment opportunities and their risks and returns.
intermediateEconomic Growth
The increase in the production of goods and services in an economy over time.
advancedKey Concepts
Interest RatesSupply and DemandInvestmentSavings