Loanable funds market

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9 Terms

1
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loanable funds market

the private sector supply and demand of loans

show REAL INTEREST RATE

2
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loanable funds market demand

inverse relationship between real interest rate and quantity loans demanded

3
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supply loanable funds market

direct relationship between real interest rate and quantity loans supplied

4
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loanable funds market

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5
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investment demand

anything that impacts the profit potential of new investments

6
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savings supply

disposable income, economic outlook, foreign investment meaning foreign people saving their money in the US market

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loanable funds equilibrium

increase in saving supply —> decrease in real interest rate —> decrease in real interest rate —> increase in quantity loanable funds

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crowding

increase in government deficit life expansionary policy will increase interest rate will increase interest rate and reduce gross investment —> lower economic growth.

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crowding

  1. increase demand for loanable funds (rightward shift increases real interest rate resulting in lower quantity of investment purchased)

  2. decreased supply loanable funds: increase rate and reduces the quantity of investment)