1. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Interest Rate Determination Classical Theory Marginal Efficiency of Capital (MEI) – Supply of Funds –

2. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Interest Rate Determination Classical Theory (cont.) Market Equilibrium Disequilibrium Conditions

3. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Interest Rate Determination Limitation of the Classical Theory Loanable Funds Approach –

4. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Interest Rate Determination Demandors of Funds Suppliers of Funds

5. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Interest Rate Determination Loanable Funds Examples:

6. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University The Monetarist View of Interest Rates The Old Quantity Theory The Classical Quantity Theory 

7. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University The Monetarist View of Interest Rates The Modern Quantity Theory Changes in the Money Supply have 3 effects: 

8. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Neo-Keynesian Model Interest rates are dependent upon…  Transaction Demand –  Speculative Demand – Examples: Increasing the money supply  Decreasing the money supply 

9. David M. Harrison, Ph.D. Real Estate Finance Texas Tech University Sources of Risk Risks Associated with Mortgage Investing