The Loanable Funds Market is the private sector supply and demand of loans.
-This market brings together the savers and the borrowers.
-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)
Federal Fund Rate: Interest rate that banks charge one another for overnight loans.
Prime Rate: Interest rate that the banks charge their most credit worthy customers.
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