April 3, 2017
Loanable Funds Market
- Private sector supply and demand of loans
- Bring together lenders and borrowers
- Shows 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
- NOT the same as money market (supply is not vertical)
Federal funds rate: interest rate that banks charge one another for overnight loans
Prime rate: interest rate banks charge their most creditworthy customers
No comments:
Post a Comment