平狄克微观经济学MarketsforFactorInputs幻灯片.ppt

Chapter 14 49 2 2 3 2 4 3 5 3 6 3 7 3 8 3 9 3 13 3 15 3 16 19 3 21 22 23 24 27 28 30 32 33 37 38 40 41 42 43 44 45 46 48 2 S Supply and Demand for Loanable Funds Quantity of Loanable Funds R Interest Rate R* Q* Equilibrium interest rate is R*. DT DH DF How Are Interest Rates Determined? The supply and demand for loanable funds determines the equilibrium interest rate If recession hits, the NPV of projects will fall, firms will invest less, and demand for loanable funds will fall DF and DT will fall, causing interest rate to fall If government has to borrow money, demand will increase and R also increases Fed shifts supply of loanable funds, as well Changes in the Equilibrium S DT R* Q* During a recession, interest rates fall due to a decrease in the demand for loanable funds. D’T Q1 R1 Quantity of Loanable Funds R Interest Rate Changes in the Equilibrium S DT R* Q* When the federal government runs large budget deficits, the demand for loanable funds increases. Q2 R2 D’T Quantity of Loanable Funds R Interest Rate Changes in the Equilibrium S DT R* Q* When the Federal Reserve increases the money supply, the supply of loanable funds increases. S’ R1 Q1 Quantity of Loanable Funds R Interest Rate A Variety of Interest Rates Treasury Bill Rate Short-term (1 yr or less) bond issued by US government Pure discount bond – no coupon payments Short-term, risk-free rate Treasury Bond Rate Longer-term bond, typically 10-30 yrs Rates depend on maturity of bond A Variety of Interest Rates Discount Rate The rate the Federal Reserve charges commercial banks for short period loans, called discounts Federal Funds Rate Interest rate banks charge one another for overnight loans of federal funds Banks with excess reserves may loan them to banks with reserve deficiencies A Variety of Interest Rates Commercial Paper Rate Short-term (6 months or less) discount bonds used by high-quality corporate borrowers Slightly riskier than treasury bills, so rate is less than 1% higher than Treasury