Equilibrium Between Demand for and Supply of Loanable

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Equilibrium Between Demand for and Supply of Loanable 
The rate of interest will be determined by the equilibrium between the total demand for loanable funds and the total supply of loanable funds  In this figure LS is the total supply curve of loanable funds, which has been derived by the lateral summation of the saving curve S, dishoarding curve DH, B credit curve BM and disinvestment curve Of. Total demand curve for loanable funds is LD whieh has been found out by the lateral addition of curves I. C ami H, which show respectively the demand for loanable funds for investment purposes, consumption purposes and for hoarding. The curve LD of total demand for loanable funds and curve LS Of the total supply of loanable funds intersect each other at ‘the rate of interest Or ( = NE). At this rate. the loanable funds lent or supplied are equal 10 the loanable funds borrowed or demanded. Hence. Or is the equilibrium rate of interest which will tend to settle in the loan market

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Equilibrium Between Demand for and Supply of Loanable