How Interest Rates Are Determined: Loanable Funds Theory
Book: Financial Markets and Institutions, 11th Edition Author: Jeff Madura Publisher: Cengage Learning, 2015 ISBN: 978-1-133-94788-2
Chapter 2 answers a question that affects everyone: why do interest rates go up and down? The answer comes down to supply and demand for money, explained through what economists call the loanable funds theory.