Loanable funds
Basic features

According to Ohlin (op. cit., p. 222), one cannot say "that the rate of interest equalises planned savings and planned investment, for it obviously does not do that. How, then, is the height of the interest rate determined. The answer is that the rate of interest is simply the price of credit, and that it is therefore governed by the supply of and demand for credit. The banking system – through its ability to give credit – can influence, and to some extent does affect, the interest level."
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