26.2 The Loanable Funds Market

MyEconLab Concept Video

In macroeconomics, we group all the individual financial markets into a single loanable funds market. The loanable funds market is the aggregate of the markets for loans, bonds, and stocks. In the loanable funds market, there is just one average interest rate that we refer to as the interest rate.

Thinking about financial markets as a single loanable funds market makes sense because the individual markets are highly interconnected with many common influences that move the interest rates on individual assets up and down together.

Flows in the Loanable Funds Market

The circular flow model (see Chapter 21 previous ...

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