Question

In the open-economy macroeconomic model, if a country’s supply of loanable funds shifts right, then

Answer 1

Answer:

According to the situation given in the question, if a country's supply of loan able funds shift rights , then A) the net capital outflow will increase and so the exchange rate will fall.

Explanation:

According to the situation given in the question , the supply of funds available for loan, depends upon the national savings, so if there is high amounts of national savings available it means the funds are available for the borrowers, who are in need of funds for their investment projects. And the demand for funds available for loan comes from the domestic investment and net capital outflow.

If the supply of funds are high in the economy then obviously the interest rate will also come down and the net capital outflow will be more.