A small country is a net foreign borrower and its demand for loanable funds increases. As a result,the equilibrium quantity of loanable funds used in the country ________ and the country's foreign borrowing ________.
A)does not change; does not change
B)increases; does not change
C)does not change; increases
D)increases; increases

Question

Quizplus · Accepted Answer

When the demand for loanable funds increases in a small country that is a net foreign borrower, both the equilibrium quantity of loanable funds used in the country and the country's foreign borrowing increase. This is because the country will need to borrow more from abroad to meet the increased demand for funds.

A Small Country Is a Net Foreign Borrower and Its