In the open-economy macroeconomic model,the supply of loanable funds comes from
A)national saving.Demand comes from only domestic investment.
B)national saving.Demand comes from domestic investment and net capital outflow.
C)Only net capital outflow.Demand for loanable funds comes from national saving.
D)domestic investment and net capital outflow.Demand for loanable funds comes from national saving.

Question

Quizplus · Accepted Answer

In an open-economy macroeconomic model, the supply of loanable funds comes from national saving. However, in addition to domestic investment, demand also comes from net capital outflow, which is the difference between capital inflow (foreign investment in domestic assets) and capital outflow (domestic investment in foreign assets). Therefore, option B, which states that demand comes from domestic investment and net capital outflow, is the best choice. Option D is partly correct, but it only covers the sources of demand for loanable funds and does not mention the source of supply (national saving).

In the Open-Economy Macroeconomic Model,the Supply of Loanable Funds Comes