Sunday, March 29, 2015

NOTES (3/23/15) - Loanable Funds Market 
  • market where savers and borrowers exchange funds (Qlf) at the real rate of interest (r%)
  • demand for loanable funds, or borrowings, comes from households, firms, government, and the foreign sector; demand for loanable funds is in fact the supply of bonds
  • supply of loanable funds, or savings, comes from households, firms, goverment, and the foreign sector; supply of loanable funds is also the demand for bonds
Changes In Loanable Funds
  • demand for loanable funds = borrowing (i.e. supplying bonds)
  • more borrowing = more demand for loanable funds (->)
  • less borrowing = less demand for loanable funds (<-)
  • Examples:
    • government deficit spending = more borrowers
    • less investment spending = less borrowing
Changes In Supply of Loanable Funds 
  • supply of loanable funds = savings
  • more savings = more supply of loanable funds (->)
  • less savings = less supply of loanable funds (<-)
  • Examples:
    • government budget surplus = more savings
    • decrease in consumers' MPS = less savings
  • when government does fiscal policy it will effect the loanable funds market
  • change in real interest rate (r%) will affect Gross Private Domestic Investment
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1 comment:

  1. UnknownMarch 30, 2015 at 2:02 AM

    I like the fact that you use arrows to show how the graph moves, but can you also include a visual of what that change would look like? It would great improve your content by helping the textual clues connect with the visual. Just a friendly suggestion :)

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