Loanable Funds Market

• The private sector supply and demand of loans 
• This market brings together those who want to lend money (savers) and those who want to borrow (firms with investment spending projects) 
• This market shows the effect on REAL INTEREST RATE 
• Demand- Inverse relationship between real interest rate and quantity loans demanded 
• Supply - Direct relationship between real interest rate and quantity loans supplied 
• This in NOT the same as the money market (supply is not vertical)
• Prime Rate -Intrest rate that banks charge their most credit worth customers