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Investment Demand

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What's wrong with the following statement? If the investment demand for loanable funds rises, then the supply of loanable funds will rise, so the equilibrium market interest may rise or fall.

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The response address the queries posted in 722 words with references.
// This paper is a discussion about the investment demand and the explanation of how the equilibrium market may rise or fall with the investment demand rising and falling for the loan able funds. We will begin with the definition of each term and proceed with their inter-relatedness: //

Investment demand refers to demand by businesses to maintain and expand their operations by investing the physical capital goods and services. Investment demand does not refer to demand by households for increase in the wealth or for some other purposes.

Loan able Funds:-Funds which are available for borrowing is known as loanable funds. Loan able funds consist of bank loans and household savings.

Investment demand for loan able funds rises because of the investment in new capital goods. Demand and supply of loan able funds depends on the demand and supply of capital. Cost of loan able funds is the interest rate which is paid by the borrower of the funds and it is an income or rate of return for the lender or supplier of the funds. Interest rate is mostly measured in annual percentage rate.

// Now, we ...

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Ashish Sharma, MBA (IP)
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  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
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