Question

Over time, how do changes in the demand for loanable funds and the supply of loanable funds change the real interest rate? over time, _______

Answer 1

Over time, with changes in the demand for loanable funds and the supply of loanable funds change the real interest rate will occur. The interest rates will increase with the increase in demand and decrease with increase in supply.

Loanable funds is the sum total of all the money people and entities in an economy have decided to save and lend to borrowers as an investment rather than personal use.

Interest rates can determine how much money lenders are willing to save and invest. When the demand for the loanable funds increases it pushes the rates up, and when the supply of the loanable fund decreases it pushes the rates lower.

Central banks can manipulate the interest rates to influence the economy.

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