Loanable Funds Market
The Loanable Funds Market
- An interest rate of 50%
- BAD for BORROWERS
- GOOD for SELLERS
- The loanable funds market is the private sector supply and demand of loans
- Brings together those that want to lend money (savers) and those who want to borrow (firms with investment spending projects)
Shows the Effect on Real Interest Rate
- Demand: Inverse relationship between real interest rate and quantity loans demanded
- Supply: Direct relationship between real interest rate and quantity loans supplied
- NOT the same as the money market
- Supply is not vertical
Prime Rate
- The interest rate that banks charge their most credit worth customers
- BAD for BORROWERS
- GOOD for SELLERS
- Brings together those that want to lend money (savers) and those who want to borrow (firms with investment spending projects)
- Demand: Inverse relationship between real interest rate and quantity loans demanded
- Supply: Direct relationship between real interest rate and quantity loans supplied
- NOT the same as the money market
- Supply is not vertical
Prime Rate
- The interest rate that banks charge their most credit worth customers
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