If at a given real interest rate desired national saving is $200 billion,domestic investment is $100 billion,and net capital outflow is $80 billion,then at that real interest rate in the loanable funds market there is a
A)surplus.The real interest rate will rise.
B)surplus.The real interest rate will fall.
C)shortage.The real interest rate will rise.
D)shortage.The real interest rate will fall.

Question

Quizplus · Accepted Answer

At a given real interest rate, desired national saving exceeds domestic investment, resulting in a surplus of funds in the loanable funds market. Net capital outflow represents the amount of domestic capital being invested abroad, which further adds to the surplus of funds. The surplus puts downward pressure on the real interest rate, causing it to fall until demand for funds increases and the market reaches equilibrium. So, the correct answer is (B) surplus, and the real interest rate will fall.

If at a Given Real Interest Rate Desired National Saving