The loanable funds theory categorizes all market participants (consumers, businesses, governments, and foreign participants) as net suppliers or demanders of funds.
The theory describes that the loanable funds are all the income that individuals and organizations have decided to save and loan out rather than spend on consumption. The loanable funds theory is based on the market's interest rates and the various components that they influence, hence a Supply and demand are discussed as the key parts of this theory.
In conclusion, the theory mainly categorizes all market participants (consumers, businesses, governments, and foreign participants) as net suppliers or demanders of funds.
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