Time and money(Roger W.Garrison)

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Time and Money
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Table of Contents
Part I: The Elements of Capital-Based Macroeconomics Part II: Integrating the Elements Part III: Saving as a Basis for Sustainable Growth Part IV: Legislating Low Interest Rates Part V: Manipulating Interest Rates with Money Part VI. Letting the Economy Grow
The Market for Loanable Funds
The supply price of investable resources is measured by (and sometimes proxied by) the rate of interest. Though saving can actually take the form of lending through banking institutions, it can also take the form of retained earnings or the buying of bonds or equity shares.
The demand price is similarly interpreted to include the various ways that the business community can take command of unconsumed output—which constitutes the investable resources.
-from Alan Ebenstein’s Friedrich A. Hayek: A
F. A. HAYEK
Biography
Based on the Theory of Sustainable An Application and the Business Cycle set Unsustainable of Capital-Based out by Ludwig von Mises Growth Macroeconomics and F. A. Hayek
The Market for Loanable Funds
“Loanable funds” is the generic term that refers both to lending (which constitutes the supply side of the market) and to borrowing (which constitutes the demand side). Each side of the market for loanable funds is governed by the rate of interest. Saving, broadly conceived, underlies the supply of loanable funds. Borrowing by the business community constitutes the demand.
The Market for Loanable Funds
“Loanable funds” is the generic term that refers both to lending (which constitutes the supply side of the market) and to borrowing (which constitutes the demand side). Each side of the market for loanable funds is governed by the rate of interest. Saving, broadly conceived, underlies the supply of loanable funds. Borrowing by the business community constitutes the demand. The As recognized quantity axis by both measures Eugen von Bohm-Bawerk saving (and investment) and John as Maynard the amount Keynes, of output this market is in produced better a given thought period of as the and made market available for investable for (and resources. actually used It keeps for) the the macroeconomically expansion of the economy’s relevant magnitudes productive capacity. of saving (S) and investment (I) in balance.
One student at LSE in the 1930s recalls the "three-dimensional diagrams with which Hayek presented his ideas and which made them seem like something in the field of engineering." Another LSE student noted that Hayek wore "a thick tweed suit with a waistcoat and high-cut jacket." She nicknamed him 'Mr. Fluctooations' as he so often used that word and pronounced it in that way.“
Capital-based macro features consumption and investment as alternative ways to use resources. The alternative uses are depicted as a Production Possibilities Frontier (PPF). The PPF shows the maximum sustainable level of output as a locus of points representing all possible combinations of consumption and investment for a fully employed economy.
The demand price is similarly interpreted to include the various ways that the business community can take command of unconsumed output—which constitutes the investable resources.
The Market for Loanable Funds
The supply price of investable resources is measured by (and sometimes proxied by) the rate of interest. Though saving can actually take the form of lending through banking institutions, it can also take the form of retained earnings or the buying of bonds or equity shoanable Funds
Capital-based macro features consumption and investment as alternative ways to use resources. The alternative uses are depicted as a Production Possibilities Frontier (PPF).
Consumer borrowing is netted out on the supply side. That is, the focus is on the funds lent collectively by income-earners/savers to the business community. In this graphical exposition, the supply and demand for investable funds results in a market-clearing interest rate of 5% with saving and investment amounting to $800 billion.
PART I
Go To: Table of Contents
The Elements of Capital-Based Macroeconomics
“Loanable funds” is the generic term that refers both to lending (which constitutes the supply side of the market) and to borrowing (which constitutes the demand side). Each side of the market for loanable funds is governed by the rate of interest. Saving, broadly conceived, underlies the supply of loanable funds.