Saturday, August 29, 2009

total demand for loanable funds

The total demand for loanable funds is the sum of consumer, business, and government credit demands. This demand curve slopes downward and to the right with respect to the rate of interest. Higher rates of interest lead some businesses, consumers, and governments to curtail their borrowing plans, while lower rates bring forth more credit demand. However, the demand for loanable funds does not determine the rate of interest by itself.

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