If the supply of loanable funds shifts right,then the equilibrium
A)interest rate falls,so domestic residents will want to purchase more foreign assets.
B)interest rate falls,so domestic residents will want to purchase fewer foreign assets.
C)interest rate rises,so domestic residents will want to purchase more foreign assets.
D)interest rate rises,so domestic residents will want to purchase fewer foreign assets.

Question

Quizplus · Accepted Answer

An increase in the supply of loanable funds will cause a decrease in the interest rate. As a result of this decrease in interest rate, domestic residents will have less incentive to keep their money in domestic banks and will want to purchase foreign assets where they can get a higher return. This means that they will buy more foreign assets, causing an increase in demand for foreign currency and a depreciation of the domestic currency.

If the Supply of Loanable Funds Shifts Right,then the Equilibrium