In the open-economy macroeconomic model,the purchase of a capital asset by domestic residents adds to the demand for loanable funds
A)only if the asset is located at home.
B)only if the asset is located abroad.
C)whether the asset is located at home or abroad.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

In the open-economy macroeconomic model, purchasing a capital asset by domestic residents increases demand for loanable funds regardless of whether the asset is located at home or abroad. This is because such purchases require financing, which in turn requires borrowing from the market for loanable funds.

In the Open-Economy Macroeconomic Model,the Purchase of a Capital Asset