the demand curve (D) for borrowing financial capital intersects the supply curve (S) for lending financial capital at

equilibrium E. At the equilibrium, the interest rate (the “price” in this market) is 15% and the quantity of financial

capital loaned and borrowed is $600 billion. The equilibrium price is where the quantity demanded and the quantity

supplied are equal. At an above-equilibrium interest rate like 21%, the quantity of financial capital supplied would

increase to $750 billion, but the quantity demanded would decrease to $480 billion. At a below-equilibrium interest

rate like 13%, the quantity of financial capital demanded would increase to $700 billion, but the quantity of financial

capital supplied would decrease to $510 billion.
98 4 • Labor and Financial Markets

Interest

Rate (%)

Quantity of Financial Capital Demanded

Quantity of Financial Capital Supplied

(Borrowing) ($ billions)

(Lending) ($ billions)

11

13

15

17

19

21

$800

$700

$600

$550
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