Foreign savings increase the supply of loanable funds in the United States, which lowers the cost of borrowing and keeps interest rates lower than they would be without the influx of foreign savings. This can be beneficial for consumers and firms looking to borrow money for investments.

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Foreign Savings

Question 90

Multiple Choice

Foreign savings:

A) keep interest rates lower in the United States than they would otherwise be.
B) keep interest rates higher in the United States than they would otherwise be.
C) are harmful to the U.S.economy.
D) only occur through buying Treasury securities.
E) make it so U.S.firms and governments must undertake their activities at higher costs.

Correct Answer: