If the real interest rate in the domestic loanable funds market increases,
A) firms will have an added incentive to undertake investment projects.
B) households will save less.
C) the net inflow of foreign capital will tend to increase.
D) it will be cheaper to purchase goods and services now rather than in the future.

Question

Quizplus · Accepted Answer

An increase in the real interest rate makes domestic financial assets more attractive to foreign investors, leading to a net inflow of foreign capital.

If the Real Interest Rate in the Domestic Loanable Funds