Loanable funds
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In economics, the loanable funds market is a hypothetical market that brings savers and borrowers together, also bringing together the money available in commercial banks and lending institutions available for firms and households to finance expenditures, either investments or consumption. Savers supply the loanable funds; for instance, buying bonds will transfer their money to the institution issuing the bond, which can be a firm or government. In return, borrowers demand loanable funds; when an institution sells a bond, it is demanding loanable funds. Another term for financial assets is "loanable funds", funds that are available for borrowing, which consist of household savings and sometimes bank loans. Loanable funds are often used to invest in new capital goods, therefore, the demand and supply of capital is usually discussed in terms of the demand and supply of loanable funds.[1][2][3]
Notes
- ^ Wessels 2000, p. 102
- ^ "Capital, Loanable Funds, Interest Rate". CliffsNotes. Retrieved 2008-10-04.
- ^ McConnell 2005, p. 547
References
- McConnell, Campbell R.; Brue, Stanley L. (2005). Economics. McGraw-Hill Professional. ISBN 0072819359.
{{cite book}}: CS1 maint: multiple names: authors list (link) - Wessels, Walter J. (2000). Economics. Barron's Educational Series. ISBN 0764112740.