The supply of loanable funds comes from:[Fill in the blank]

Question

BlackTom AI · Accepted Answer

Supply of loanable funds equals national saving because savers — households and the government — provide funds that lenders make available for borrowers (firms and others). Relevant concepts: the loanable funds market, national saving (private + public), the identity for a closed economy, and the distinction between supply (saving) and demand (investment).

1) Knowledge points and formulas
- Gross domestic product identity (closed economy): Y = C + I + G.
- National saving S = Y − C − G (which equals private saving + public saving).
- In a closed economy, S = I (saving finances domestic investment).
- Supply of loanable funds is upward sloping in the real interest rate: higher rates encourage more saving.

2) Step-by-step reasoning
- Rearranging Y = C + I + G gives I = Y − C − G. But Y − C − G is the definition of national saving S, so I = S.
- Thus, the funds demanded for investment come from the supply of saving. Therefore, the supply side of the loanable funds market is composed of national saving.
- In an open economy, foreign saving can supplement the supply (capital inflows), but the fundamental domestic source is still national saving.

3) Intermediate steps / algebra
- Start: Y = C + I + G.
- Subtract C and G: Y − C − G = I.
- Define S = Y − C − G, so S = I → national saving supplies investment funds.

4) Why the correct answer is correct
- National saving (private + public) is the pool of resources available for lending. It is precisely what supplies the loanable funds market in standard macroeconomic models.

5) Why other options are incorrect
- (a) the government: only one component (public saving), not the entire supply.
- (c) domestic investment: investment is the demand for loanable funds, not the supply.
- (d) foreign sources: can provide additional funds in an open economy, but the primary supply in the standard model is national saving; the question’s correct answer is national saving.

Conclusion: The supply of loanable funds comes from national saving, confirming answer b.

The supply of loanable funds comes from:[Fill in the blank]单项选择题

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