Loanable Funds Market

Definition

The loanable funds market represents the interaction between borrowers and lenders in an economy. It determines the equilibrium interest rate and quantity of loanable funds available for investment or borrowing.

Related terms

Crowding Out Effect: The crowding out effect occurs when increased government borrowing reduces private sector borrowing by increasing interest rates.

Savings-Investment Spending Identity: This identity states that savings must equal investment spending in an economy.

Capital Market: The capital market refers to financial markets where long-term debt or equity securities are bought and sold.