A small country is an international lender and its domestic supply of loanable funds increases. Consequently, the equilibrium quantity of loanable funds used in the country ________ and the country's international lending ________.

Question

Quizplus · Accepted Answer

When a small country's domestic supply of loanable funds increases, it typically does not affect the equilibrium quantity of loanable funds used domestically because the country's interest rate is determined by the world interest rate. However, the increase in supply means the country has more funds available for lending, thus its international lending increases.

A Small Country Is an International Lender and Its Domestic