Financial Sector & Loanable Funds
All 7 Financial Sector & Loanable Funds terms in the AP Economics glossary, each with a clear, exam-accurate definition. Tap any term for the full explanation, formula, and related interactive graph.
Bond prices and interest rates move in opposite directions: when market interest rates rise, the price of existing bonds falls, and vice versa.
The Fisher equation states that the nominal interest rate equals the real interest rate plus the expected inflation rate.
The loanable funds market is where savers supply funds and borrowers demand funds, and its equilibrium determines the real interest rate.
The nominal interest rate is the stated interest rate on a loan or investment, before any adjustment for inflation.
Private saving is the portion of disposable income that households and businesses do not spend on consumption.
The real interest rate is the nominal interest rate minus the inflation rate, showing the true cost of borrowing or return to saving.
The investment demand curve shows the inverse relationship between the real interest rate and the quantity of investment spending firms want to undertake.