In the market for loanable funds in an open economy, the demand for loanable funds comes from:

Question

Quizplus · Accepted Answer

In an open economy, the demand for loanable funds comes from both domestic investment and international investment. Domestic investment refers to businesses and governments borrowing funds to invest in projects within the country, while international investment refers to businesses and governments borrowing funds from foreign investors to invest in projects within the country. Together, these two sources of demand make up the demand for loanable funds in an open economy. Consumption of major assets, domestic savings, and export purchases do not directly contribute to the demand for loanable funds in the market.

In the Market for Loanable Funds in an Open Economy