Loanable funds

In economics, the "loanable funds theory" is the theory that pictures bank loans as the intermediation of real savings, or loanable funds, between non-bank savers and non-bank borrowers.

It is also a theory of the market interest rate. According to this approach, the interest rate is determined by the demand for and supply of loanable funds. The term loanable funds includes all forms of credit, such as loans, bonds, or savings deposits.

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