UNIT 4: LOANABLE FUNDS

market where savers and borrowers exchange funds (QLF) @ real rate of interest.

• demand for loanable funds, or borrowing comes form households, firms, gov, and foreign sectors. demand for loanable funds is in fact the supply of bonds.
• supply of loanable funds or saving comes from households, firms, gov, and foreign sector. supply of loanable funds is also demand for bonds. 

• remember that demand for loanable funds = borrowing 
• more borrowing = more demand for loans
• less borrowing = less demand for loans

EX. gov deficit spending = more borrowing
less investment demand = less borrowing

change in supply:

• remember supply of loanable funds = savings (demand for bonds)
• more saving = more supply of loanable funds
• less saving = less supply of loanable funds
• when gov. does fiscal policy, it will affect the loanable funds markets
• changes in real interest rate will affect gross private investment.