Neo classical theory of interest

This for education purpose.

1. Neo-Classical Theory of Interest or Loanable Fund Theory of Interest Presented by – Ritika katoch

2. Loanable Fund Theory of Interest Loanable Theory of Interest was first given by Knut Wicksell & then later on it was explained by Pigou and other economist. According to this theory, rate of Interest is determined by loanable fund.

3. What is Loanable fund? Loanable Fund Demand for Loanable fund Supply for Loanable fund Prof. Robertson :- Interest is the price which equates the Demand Loanable Fund & Supply Loanable Fund.

4. Demand For Loanable Fund Investment (capital formation) Consumption or Dissaving Hoarding In Equation, DLF = I + C + H

5. Supply for Loanable Fund Saving Bank – Credit Dishoarding Dis-Investment In Equation, SLF = S + B + D.H + D.I

6. Determination of Equilibrium of Interest Rate

7. Determination of Interest in Equation Form DLF = SLF I + C + H = S + B + DH + DI (I - DI) + (H - DH) = S + B + C Net Investment + Net Hoarding = Net saving + Bank Credit

8. Criticism Full Employment Indeterminate Impracticable

9. Thank You.