The link between the loanable funds market and the foreign exchange market is
A) The governments of the countries involved.
B) The International Monetary Fund.
C) Net capital outflow.
D) Purchasing power parity.

Question

Quizplus · Accepted Answer

The link between the loanable funds market and the foreign exchange market is net capital outflow. Net capital outflow is the difference between the amount of domestic savings available for investment and the amount of domestic investment. It represents the flow of funds out of a country for the purpose of investing overseas. This concept is important for understanding how changes in interest rates affect exchange rates and vice versa, as well as how international borrowing and lending can impact a country's economy.

The Link Between the Loanable Funds Market and the Foreign