LOANABLE FUND THEORY – ALL YOU NEED TO KNOW
The loanable funds theory describes the ideal interest rate for loans as the point in which the supply of loanable funds intersects with the demand for loanable funds. Under this theory, the loanable funds market is evaluated by building on a classical market analysis, with loanable funds acting as the “product” and the real interest rate (the interest rate after accounting for inflation) acting as the “price”………….
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