If a country has a high savings rate relative to other countries, then the
A) Supply of loanable funds is larger, interest rates are lower, and net capital outflow is higher for that country than for others.
B) Supply of loanable funds is smaller, interest rates are higher, and net capital outflow is lower for that country than for others.
C) Demand for loanable funds is larger, interest rates are higher, and net capital outflow is lower for that country than for others.
D) Government must subsidize production in order to encourage international trade.

Question

Quizplus · Accepted Answer

A high savings rate means that there is more money available for investment within the country. This increased supply of loanable funds will lead to lower interest rates, making it attractive for other countries to borrow from the country with the high savings rate. This will result in a higher net capital outflow for the country with the high savings rate, as more money is leaving the country for investment purposes elsewhere.

If a Country Has a High Savings Rate Relative to Other