Loanable Funds Market

Markets where savers and borrowers exchange funds (Qlf) at a real rate of interest rate. The demand for loan-able funds, or borrowing comes from household, firms, government and foreign sector. The demand for loan-able funds is in fact the supply of bonds. Supply of the loan-able funds or savings comes from the households. 

*Changes in Demand for loan-able funds: Demand for loan-able funds equal borrowing, more borrowing equals more demand for loans funds (-->).  Less borrowing equals less demand for loan-able funds (<--)   Dlf --> :r%:increases

Example: Government deficit spending equals more borrowing and more demand for loan able funds

Dlf --> :r%:increases
-Less investment demand equals less borrowing and less demand for loan-able funds.
 Dlf <--: r%: decreases.

Supply of loan-able funds equals saving (i.e. demand for bonds)

-More saving equals more supply of loan-able funds (-->)

- Less saving equals less supply of loan-able funds (<--) 

Example: Government budget surpluses equals more saving and more supply of loan-able funds.
 Slf -->:r%: decreases
Decrease in consumers MPS equals less supply of loan-able funds and less savings

 Slf <---: r%: increases 

When the government does fiscal policy it will affect the loan-able funds market.

-Changes in real interest rate (r%) will affect Gross Private Investment.