Respuesta :
The loanable funds theory of interest shows that interest rates on loans are determined by the supply of and demand for loanable funds.
What is "Loanable Funds Theory of interest"?
- A hypothesis of market interest rates is the loanable funds doctrine.
- With this strategy, the supply and demand of loanable money determine the interest rate.
- All types of credit, including loans, bonds, and savings accounts, are referred to as "loanable money." The late D.H. Robertson, the leading proponent of the loanable funds theory of interest rates, used the phrase "loanable funds" to refer to what Marshall called "capital disposal" or "command over capital."
- Savings are the source of the loanable funds available. It is predicated on borrowing that loanable funds are in demand.
- The real interest rate and the amount of loans made depend on how the supply of savings and the demand for loans interact.
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