In this lesson, our instructor Jibin Park gives an introduction on the market for loanable funds. He discusses loanable funds market, equilibrium in loanable funds market, shifts of demand for loanable funds, shifts of the supply of loanable funds, inflation and interest rates, increase in supply of loanable funds, interest rates in the short run, and interest rate in the long run.
The loanable funds market matches savers and investors
Changes in perceived business opportunities and changes in government borrowing will shift the demand for loanable funds
If the government runs a budget deficit, demand increases, real interest rates increases and business invest less because of the “crowding-out” effect
Changes in private savings behavior and changes in capital inflows will shift the supply for loanable funds
Inflation tends to help borrowers and hurt savers
Real interest rate = Nominal interest rate – inflation rate
According to the Fisher effect, the expected real interest rate is unaffected by the change in expected future inflation as borrowers and lenders base decisions on the expected real interest rate and not the nominal
The Market for Loanable Funds
Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.
This book created a 5-step plan to help you study more effectively, use your preparation time wisely, and get your best score. This book includes two full-length practice exams modeled on the real test, all the terms and concepts you need to know to get your best score, and your choice of three customized study schedules.
This book includes an in-depth preparation for both AP economics exams. It features two full-length practice tests, one in Microeconomics and one in Macroeconomics, and all test questions answered and explained. It also features a detailed review of all test topics, which include: supply and demand, theory of consumer choice, economics in the public sector, costs, perfect and imperfect competition, monopolies, labor resources, game theory, the national income and gross domestic product, inflation and unemployment, fiscal policy, money and banking, monetary policy, economic growth, international trade and exchange, interest rate determination, and the market for loanable funds.