Asked by Jennah Marie on Jul 01, 2024
Verified
In an open economy, the demand for loanable funds comes from both domestic investment and net capital outflow.
Loanable Funds
The funds available for borrowing in the financial markets, involving the lending and borrowing between savers and borrowers, which determines the equilibrium interest rate.
Domestic Investment
The total amount of resources invested in the production of goods and services within a country’s borders.
Net Capital Outflow
The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners.
- Gain insight into the sources influencing the supply and demand of loanable funds in an open economy.
Verified Answer
CN
Chicken NuggetsJul 02, 2024
Final Answer :
True
Explanation :
In an open economy, the demand for loanable funds is driven by the need for financing both domestic investment projects and net capital outflow, which includes investments in foreign assets.
Learning Objectives
- Gain insight into the sources influencing the supply and demand of loanable funds in an open economy.