Unit 4, Video 4 Summary

Loan-able funds graphs are easy to draw, interest rates go on the Y-Axis, Quantity goes on the X. There are two lines on the graph, supply of funds which slopes upward and demand for funds which slopes downward and the point they intersect at is the equilibrium. The supply of loan-able funds is dependent on savings. The more money people save, the more money banks have to loan. If the government runs at a deficit, then the demand for money will increase causing the interest rates to go up. The demand will shift to the right or increase. However, the supply of loan-able funds also increase because the supply of money is decreasing. Both can be shown on this graph but only one at a time as they mean roughly the same thing.