loanable

Loanable Funds Market

4-3-17

• is interest rate of 50% good or bad
• bad for borrowers but good for lenders
• Loadable funds market is private sector supply and demand of loans
• this market brings together those who want to lend $1(savers) and those who want to borrow(firm with investment spending projects)
• This market shows effect of real interest rate 
• Demand- inverse relationship between real interest rate and quantity loan demanded
• Supply- direct relationship between real interest rate and quantity loans supplied
• supply is not vertical

Federal Funds rate

• interest rate that banks charge one another for overnight loans

Prime rate

• interest rate that the banks charge their credit worthy customers