Authors libby rittenberg 706

Our model of the relationship between the demand for capital and the loanable funds market thus assumes that the interest rate is determined in the market for loanable funds Given the demand curve for capital, that interest rate then determines the quantity of capital firms demand Table 13.2 "Two Routes to Changes in the Quantity of Capital Demanded" shows that a change in the quantity of capital that firms demand can begin with a change in the demand for capital or with a change in the demand for or supply of loanable funds A change in the demand for capital affects the demand for loanable funds and hence the interest rate in the loanable funds market The change in the interest rate leads to a change in the quantity of capital demanded Alternatively, a change in the loanable funds market, which leads to a change in the interest rate, causes a change in quantity of capital demanded Table 13.2 Two Routes to Changes in the Quantity of Capital Demanded A change originating in the capital market A change originating in the loanable funds market A change in the demand for capital leads to… A change in the demand for or supply of loanable funds leads to … 2.…a change in the demand for loanable funds, which leads to… 2.…a change in the interest rate, which leads to… 3.…a change in the interest rate, which leads to… 3.…a change in the quantity of capital demanded 4.…a change in the quantity of captial demanded A change in the quantity of capital that firms demand can begin with a change in the demand for capital or with a change in the demand or supply of loanable funds Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 706