A small country is a net foreign lender and its supply of loanable funds increases. As a result, the equilibrium quantity of loanable funds used in the country and the country's foreign lending .

Question

Quizplus · Accepted Answer

When a country is a net foreign lender, an increase in its supply of loanable funds will lead to a decrease in the domestic interest rate, causing an increase in domestic investment and an increase in foreign borrowing. This means that the equilibrium quantity of loanable funds used in the country does not change, but the country's foreign lending increases. Therefore, the correct choice is C.

A Small Country Is a Net Foreign Lender and Its