If people have a sudden decrease in confidence in the open economy of the U.S. and no longer want to invest there, the NCO:
A) increases, and the demand for loanable funds curve would shift right.
B) decreases, and the demand for loanable funds curve would shift left.
C) decreases, and the demand for loanable funds curve would shift right.
D) increases, and the demand for loanable funds curve would shift left.

Question

Quizplus · Accepted Answer

When people lose confidence in investing in the U.S., they seek to invest abroad, increasing the net capital outflow (NCO). This increases the demand for loanable funds as more capital is needed to finance these foreign investments, shifting the demand curve to the right.

If People Have a Sudden Decrease in Confidence in the Open