Learning objectives
Explain that the demand for loanable funds comes from borrowers (firms, households and government) and slopes downward with the real interest rate, while the supply comes from national saving and foreign inflows and slopes upward
Draw a correctly labeled loanable funds graph and find the equilibrium real interest rate and quantity of funds
Identify what shifts the demand for loanable funds (investment opportunities, business expectations, government borrowing) and the supply (private saving, public saving, capital inflows)
Analyze the effect of a change in saving or borrowing behavior on the equilibrium real interest rate, and connect the result to investment, AD and long-run growth
Distinguish the loanable funds market (real interest rate, saving and investment) from the money market (nominal interest rate, money supply and demand)
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