Rate of Return On Capital
The "rate of return on capital" is taken into account when determining the demand for loanable funds. This is the additional revenue that a firm can earn from its employment of new capital, and is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital. As long as the rate of return on capital is greater than or equal to the interest rate on paid on funds borrowed, firms will continue to demand loanable funds.
Read more about this topic: Loanable Funds
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