Beruflich Dokumente
Kultur Dokumente
Thomson/South-Western 2006
Individual Sources of Supply and Demand for Loanable Funds in the United States ! Sources of Supply ! personal saving ! business saving ! government budget surplus ! foreign lending in the U.S.
Individual Sources of Supply and Demand for Loanable Funds in the United States
! Sources of Demand ! household credit purchases ! business investment spending ! government budget deficit ! foreign borrowing in the U.S.
If supply of loan increases (supply curve shifts right), interest rate (price of loan) decreases. ! 8
Factors Shifting Supply & Demand ! Inflation Expectations ! Federal Reserve Policy ! The Business Cycle ! Federal Budget Deficits (Surpluses)
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Inflation Expectations
! Interest rates rise in periods during which people expect inflation to increase. ! Interest rates typically fall when people expect inflation to decline. ! Nominal Interest rate = Real Interest rate + Inflation Fisher Effect
inflation value of money decreases burden of debt is reduced by higher price
10
Inflation Expectations
! Nominal Interest rate = Real Interest rate + Inflation Fisher Effect
! People are less willing to lend because they expect the real value of the principal to decline supply shifts left ! People are much more willing to borrow (rather spend now than later) demand shifts right
S1LF
i 1E
D1LF
11
12
S1LF
Q1E 14
S1LF
i 1E
Q1E 15 16
Business Expansion
S1LF
D1LF
17
18
Business Recession
S1LF
i 1E D1LF
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20
22
Examples of events shifting supply curve ! personal saving resulting from demographic changes or thriftiness ! business saving ! Federal money supply ! politic and economic stability in other countries ! the lending standard from banks
i 1E
D1LF
Q1E
23
24
Examples of events shifting demand curve ! business and consumer confidence ! interest rate in the other countries ! business profits
25