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Market for Loanable Funds definitions

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  • Loanable Funds
    Income saved by households and made available for investors to borrow, forming a pool that fuels new investments.
  • Household Savings
    Money left over from income after spending, which is supplied to the market for loanable funds.
  • Investment
    Use of borrowed funds by firms or households to purchase assets like vehicles, houses, or build infrastructure.
  • Interest Rate
    Percentage charged on borrowed funds, acting as the cost of borrowing and influencing supply and demand.
  • Supply
    Amount of loanable funds provided by households, increasing with higher interest rates.
  • Demand
    Amount of loanable funds sought by investors, decreasing as interest rates rise.
  • Equilibrium
    Point where supply and demand for loanable funds meet, setting the interest rate and quantity exchanged.
  • Opportunity Cost
    Potential benefit forgone when savings are lent out instead of used for other purposes.
  • Marginal Benefit
    Additional gain received from investing borrowed funds, influenced by the interest rate.
  • Quantity of Loanable Funds
    Total amount of funds available for borrowing or lending in the market, shown on the x-axis of the graph.
  • Investor
    Individual or firm seeking to borrow funds for investment, contributing to demand in the market.
  • Firm
    Business entity that borrows large amounts from the market for loanable funds to finance major investments.
  • Bank Account
    Financial tool where household savings are stored and potentially lent out to investors by banks.
  • Price-Quantity Graph
    Visual representation of the market, with interest rate as price and quantity of loanable funds as the x-axis.
  • Equilibrium Interest Rate
    Rate at which the amount of funds supplied equals the amount demanded, balancing savings and investment.