What is the significance of loanable funds to both national and local enconmies?

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Economics

What is the significance of loanable funds to both national andlocal enconmies?

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Introduction Theinterest rate is determined by the demand for and supply ofloanable funds The term loanable funds includes all formsof credit such as loans bonds or savings depositsLoanable Fund Importance Local EconomicsThe following graph shows the demand for loanable fund inmarket1 Lenders are consumers or firms thatdecide that they are willing to forgo some current use of theirfunds in order to have more available in the future Lenders supplyfunds to the loanable funds market In general higher interestrates make the lending option more attractive2 For consumers however the decision isa bit more complicated than it is for firms In examiningconsumption choices across time economists think of consumers ashaving an expected stream of income over their lifetimes It isthat expected income that defines their consumptionpossibilities3 consumers See Answer

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