A U.S.grocery chain borrows money to buy a warehouse in Ohio and another in Italy.Borrowing for which warehouse(s)is included in the demand for loanable funds in the U.S.?
A)both the one in Ohio and the one in Italy
B)only the one in Ohio
C)only the one in Italy
D)neither the one in Ohio nor the one in Italy

Question

Quizplus · Accepted Answer

The borrowing for both warehouses is included in the demand for loanable funds in the U.S. because the U.S. grocery chain is based in the U.S. and will be borrowing from the U.S. financial market to finance its purchases. Whether the warehouses are located in the U.S. or abroad does not affect the fact that the financing is sought from the U.S. financial system. Therefore, the demand for loanable funds in the U.S. will increase due to the borrowing of the grocery chain for both warehouses.

A USGrocery Chain Borrows Money to Buy a Warehouse in Ohio