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Essay text:
Demand of money
Savings are the supply of money, and the demand of money means borrowing. Normally, supply of money has direct ratio with the interest rate. Once interest rate increases, supply of money will increase as well. In the opposite position, increase in interest rate leads to less borrowing. The intersection of the supply and the demand curve for funds indicates the equilibrium point.
If there is the rise on propensity to save, the supply curve of savings shifts to the right (S1) which leads to the lower interest rate, and vice versa (S2).
The demand curve shifts upward once more demand of the funds and the interest rate increases (D1)...
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