MKT-4.E—a. Explain (using graphs as appropriate) the determinants of demand and supply in the loanable funds market. b. Explain (using…

a. Explain (using graphs as appropriate) the determinants of demand and supply in the loanable funds market. b. Explain (using graphs as appropriate) how changes in demand and supply in the loanable funds market affect the equilibrium real interest rate and equilibrium quantity of loanable funds.

• The loanable funds market can be used to show the effects of government spending, taxes, and borrowing on interest rates.
• Factors that shift the demand (such as an investment tax credit) and supply (such as changes in saving behavior) of loanable funds change the equilibrium interest rate and the equilibrium quantity of funds.
• Enduring understanding MKT-4: The interaction of borrowers, who demand loanable funds, and savers, who supply loanable funds, determines the equilibrium real interest rate.