Tuesday, April 11, 2017


April 03, 2017
Loanable funds
  • Is an interest rate of 50% good or bad? Bad for borrowers but good for lenders
  • The loanable funds market is the private sector supply and demand of loans
  • This market brings together those who want to lend money (savers) and those who want to borrow (firms with investment spending projects)
  • This market 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
  • This is NOT the same as the money market (supply is not vertical)
Prime rate
  • The interest rate that banks charge their most creditworthy customers

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1 comment:

  1. Abdullah Z.April 12, 2017 at 5:45 AM

    The comment about the supply part of the graph not being vertical is very informative and helped me a lot in understanding. Your notes are very well structured but it would be nice if you added a graph.

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