Supply and Demand for Funds

Supply and demand for funds refer to the movement of money between savers and borrowers. The supply of funds comes from individuals or entities with excess money wanting to earn interest, while the demand for funds comes from those needing capital for investments, projects, or expenses. When interest rates are high, fewer people want to borrow, but more want to save. Conversely, when rates are low, borrowing is easier, and saving may decrease. This balance helps determine interest rates in the economy, influencing how easily individuals and businesses can access funds for their needs.