Loanable Funds Market

Loanable Funds Market 
-The market where savers and borrowers exchange funds at the real rate of interest
-The demand for loanable funds, or borrowing comes form households, firms, government and foreign sector
-The demand for loanable funds is in fact the supply of bonds
-The supply of loanable funds  or savings come from households, firms, government and the foreign sector
-The supply for loanable funds is also the demand for bonds

Changes in the Demand for Loanable Funds
-Remember that demand for loanable funds=borrowing (i.e. supplying bonds)
-More borrowing=more demand for loanable funds
-Less borrowing=less demand for loanable funds
-Ex.
     ~Government deficit spending=more borrowing=more demand for loanable funds
     ~Less investment demand-Less borrowing=less demand for loanable funds

Changes in Supply of Loanable Funds
-Remember that supply of LF=saving (i.e. demand for bonds)
-More saving=more supply of loanable funds
-Less saving=less supply of loanable funds
-Ex.
     ~Government budget surplus=more saving=more supply of loanable funds
     ~Decrease in consumer MPS=less saving=less supply of loanable funds