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4.7 The Loanable Funds Market

Part of Financial Sector in AP® Macroeconomics. Read the opening section, then create a free account for the full interactive lesson, practice, and progress tracking.

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What is the Loanable Funds Market?

The loanable funds market is a key economic model that illustrates the interaction between borrowers and lenders in an economy. This market determines the real interest rate and the quantity of loanable funds available for borrowing and investing.

In the loanable funds market graph, the x{x}-axis represents the quantity of loanable funds measured in dollars. The y{y}-axis represents the real interest rate, which is the cost of borrowing the funds, adjusted for inflation.

In this unit

10 lessons

  1. 4.1Financial AssetsPreview lesson
  2. 4.2Nominal v. Real Interest RatesPreview lesson
  3. 4.3Definition, Measurement, and Functions of MoneyPreview lesson
  4. 4.4.1Banking and Balance SheetsPreview lesson
  5. 4.4.2Expansion of the Money SupplyPreview lesson
  6. 4.5The Money MarketPreview lesson
  7. 4.6.1Introduction to Monetary PolicyPreview lesson
  8. 4.6.2Fractional Reserve Monetary PolicyPreview lesson
  9. 4.6.3Ample Reserve Monetary PolicyPreview lesson
  10. 4.7The Loanable Funds MarketThis lesson

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