<p>Yes, it does. Loanable funds are all form of credit, which are in essence subset of all money (taking the broad view of money), so if the general demand for money increases, without any further assumptions, demand for loanable funds increases. In fact in fiat money system bank credit creation equals money creation, <span class="math-container">$\Delta B=\Delta M$</span>, where <span class="math-container">$M$</span> is money and <span class="math-container">$B$</span> credit, so you will often see even some 101 textbook models treating demand for money and credit interchangeably.</p>
<p>A consequence of <span class="math-container">$\Delta B=\Delta M$</span> is that higher demand for money translates in essence to higher demand for credit (i.e. loanable funds) and vice versa.</p>

CC BY-SA 4.0
2022-03-30T10:07:51.730Z
2022-03-30T10:07:51.730Z
1muflon1
<p>Does an increase in money demand lead to an increase in demand for loanable funds? If so, what is the mechanism behind the change?</p>

CC BY-SA 4.0
2022-03-30T09:46:09.253Z
is this homework?
Dayne
CC BY-SA 4.0
2022-03-30T09:54:01.933Z
Nope, it's on the ppt slides that money demand lead to an increase in demand for loanable funds but the diagrams and mechanism behind are not shown so I was wondering why such changes take place
antifreeze
<macroeconomics><money>
Does an increase in money demand lead to an increase in demand for loanable funds?
antifreeze
# Does an increase in money demand lead to an increase in demand for loanable funds?

(Asked by: username_0 on 2022-03-30)

Does an increase in money demand lead to an increase in demand for loanable funds? If so, what is the mechanism behind the change?

**Tags:** macroeconomics, money

> **Comments:**
> **username_1**: is this homework?  
> **username_0**: Nope, it's on the ppt slides that money demand lead to an increase in demand for loanable funds but the diagrams and mechanism behind are not shown so I was wondering why such changes take place  

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## 1 answers

### Answer by username_2 on 2022-03-30. Score: 1

Yes, it does. Loanable funds are all form of credit, which are in essence subset of all money (taking the broad view of money), so if the general demand for money increases, without any further assumptions, demand for loanable funds increases. In fact in fiat money system bank credit creation equals money creation, $\Delta B=\Delta M$, where $M$ is money and $B$ credit, so you will often see even some 101 textbook models treating demand for money and credit interchangeably.

A consequence of $\Delta B=\Delta M$ is that higher demand for money translates in essence to higher demand for credit (i.e. loanable funds) and vice versa.


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