00:01
So here we're talking to the market for loanable funds, and the first thing i'm going to do is replicate this image, right? the loanable fund market is a story about the quantity of loanable funds and the real interest rate in our, right? supply in blue starts from the origin of zero, goes through here.
00:16
Demand in, i'll say red, i don't have that orange -brown, starts at 10, goes down.
00:23
This is the demand, intercepts at 1 ,000.
00:26
So now our question is, what is? is the source of loanable funds.
00:31
Generally speaking, we would say that households or savings are the source of loanable funds.
00:41
Again, i can't see your drop down, but one of those two has gotta be it, right? households save paychecks, save some of their income and provide it to the financial sector, right? so number two, as interest rate down, the quantity supply is going to increase, right? this is the upward slope.
01:04
Oh, sorry.
01:05
As the interest rate falls, the quantity supplied is going to decrease, right? this is the upward slope.
01:12
They go in the same direction, right? so the quantity supplied falls, right? there's that upward slope.
01:23
Lower interest rate makes saving funds less attractive.
01:27
So now we have this equilibrium here at five and 500.
01:33
So suppose that instead the interest rate was 4 .5...