Microeconomics › Section D · Labor and financial markets › Topic D.2
Demand and supply in financial markets
Money itself is traded: savers supply it, borrowers demand it, and the interest rate is its price. The demand-supply model runs in financial markets exactly as in goods and labour markets - and it explains why rates rise, why credit can vanish, and what happens when the law caps what lenders may charge.
In this topic
- Roles in the money market
- Rates of return beyond interest
- The laws still apply
- Worked example: a consumer-credit market
- Saving and borrowing across time
- What shifts the curves
- Worked example: a confidence shock
- Ceilings on interest: usury laws
- Risk and the spread of rates
- Common mistakes to avoid
- Key takeaways
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