Assume that foreign investors who have invested in U.S. securities decide to increase their holdings of U.S. securities. This should cause the supply of loanable funds in the United States to ____ and should place ____ pressure on U.S. interest rates.
A)decrease; upward
B)decrease; downward
C)increase; downward
D)increase; upward

Question

Assume that foreign investors who have invested in U.S. securities decide to increase their holdings of U.S. securities. This should cause the supply of loanable funds in the United States to ____ and should place ____ pressure on U.S. interest rates. ​
A)decrease; upward
B)decrease; downward
C)increase; downward
D)increase; upward

Quizplus · Accepted Answer

When foreign investors increase their holdings of U.S. securities, they are essentially buying more U.S. assets, which means they are supplying more funds to the U.S. financial markets. This increase in the supply of loanable funds tends to lower interest rates, as there is more money available for borrowing.

Assume That Foreign Investors Who Have Invested in U