ECO 1002 Lecture 23: ECO 9.2
Document Summary
Savings, interest rates, and the market for loanable funds. Interest rates as a cost of borrowing: interest rate on the demand side. Interest rate is the cost (price) of borrowing. Do a cost-benefit analysis borrow funds if: Expected return on investment > interest rate on the loan. Inflation and interest rates: real interest rate. The interest rate corrected for inflation: nominal interest rate. The interest rate before it is corrected for inflation: fisher equation. Relates inflation to the real and nominal interest rate rate rate inflation interest real nominal interest rate interest nominal or real interest rate. Real and nominal interest rates, 1960 2012 rate inflation rate. Interest rate is a reward for saving: demand of loanable funds. Comes from people wanting to borrow money. Interest rate is the cost of borrowing. What factors shift the supply of loanable funds: movement along the supply curve for loanable funds.
