BIOM 121 1nd Edition Lecture 46 Outline of Last Lecture I. What is Money/Why Do We Need It?II. How Do Banks Create Money?III. The Federal Reserve System IV. Why Don’t More Low-Income Countries Experience Rapid Growth?Outline of Current Lecture I. Market For Loanable FundsII. Factors That Change Demand For FundsIII. National Savings Current LectureI. Market For Loanable Fundsa.b. Interest rate is on the y-axis and price is on the x-axisc. Why is S sloping upward and D (borrowers) sloping downward?i. At higher interest rates, firms will be discouraged to borrowii. At higher interest rates, savers are more likely to put aside more money 1. Interest rate is determined by supply and demandII. Factors That Change Demand For Fundsa. Expected probability of future projectsi. If firms expect future projects to be more profitable then demand for funds will increaseii. Expansionsiii. During recessions, demand for funds to decrease b. Expansion interest rates go upc. Recession interest rates go down These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Savers (households who save money)Borrowers (firms, corporations, households)i. US Congress increasing investment tax credit, will increase desire to investin physical capital and hence increase demand for funds III. National Savings a. Private savings and public savingsi. Every time government runs a budget deficit, it means public savings < 0, it reduces national savings and shifts supply to the left ii. Budget surplus will increase national savings and supply of funds b. Crowding Out Effecti. Amount of funds borrowed by firms
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