The market where savers and borrowers exchange funds(Qlf) at the real rate of interest (r%)
The demand for loanable funds or borrowing comes from households, firms, government and the foreign sector. The demand for loanable funds is in fact the supply of bonds.
The supply of loanable funds, or savings comes from households,firms, government, and the foreign sector.
Changes in the Demand for Loanable Funds:
Remember that demand for loanable funds=borrowing(supplying bonds)
More borrowing=more demand for loanable funds. (Increase,right)
Less borrowing=less demand for loanable funds (decrease,left)
Changes in the Supply Fr Loanable Funds:
Remember that supply of loanable funds = saving(demand for bonds)
More savings= more supply of loanable funds (right)
Less savings=less supply of loanable funds (left)
Final Thoughts on Loanable Funds: when government does fiscal policy , it will affect the loanable funds market.
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