Demand for loanble funds comes from or borrowing households, firms, governments, and foreign sectors. Demand is supply of bonds
Supply or Savings come from H, Govs, and fs. Supply is demand of bonds
Demand for loanable funds is borrowing.
More borrowing is more demand for loanable funds.
example: Gov. deficit spending is more borrowing
- Supply of loanable funds is savings
- more saving is more supply of loanable funds
- when gov't does fiscal policy, it will affect the loanable funds markets
- changes in real interest rate will effect gross private investment.
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