A very small country is an international 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 ________.

Question

Quizplus · Accepted Answer

When the demand for loanable funds increases in a small country that is an international borrower, the equilibrium quantity of loanable funds used in the country increases. This is because the country needs more funds to finance its international borrowing. As a result, the country's foreign borrowing also increases, as it needs to raise additional funds from the international market to meet its borrowing requirements. Therefore, the correct answer is C.

A Very Small Country Is an International Borrower and Its