Loanable Funds
Loanable funds is an economic concept that refers to the total amount of money available for borrowing in an economy at any given time. It is the total amount of money that lenders are willing to lend out to borrowers. Loanable funds are determined by the supply of savings and the demand for credit. The interest rate is the price of loanable funds and is determined by the supply and demand of loanable funds.
History of Loanable Funds
The concept of loanable funds was first developed by the British economist John Maynard Keynes in the 1930s. He argued that the amount of money available for borrowing in an economy was determined by the amount of savings available and the demand for credit. He also argued that the interest rate was determined by the supply and demand of loanable funds.
Since then, the concept of loanable funds has been widely used by economists to explain the behavior of interest rates and the availability of credit in an economy. It has also been used to explain the effects of government policies on the economy, such as the effects of quantitative easing.
Table of Comparisons
| Supply of Savings | Demand for Credit | Interest Rate |
|---|---|---|
| Increases | Decreases | Decreases |
| Decreases | Increases | Increases |
Summary
Loanable funds is an economic concept that refers to the total amount of money available for borrowing in an economy at any given time. It is determined by the supply of savings and the demand for credit, and the interest rate is determined by the supply and demand of loanable funds. The concept of loanable funds has been widely used by economists to explain the behavior of interest rates and the availability of credit in an economy. For more information about loanable funds, you can visit websites such as Investopedia, The Balance, and The Economist.
See Also
- Savings
- Credit
- Interest Rate
- Quantitative Easing
- Monetary Policy
- Fiscal Policy
- Inflation
- Deflation
- GDP
- Debt
