What is the variable that links the market for loanable funds and the foreign-currency exchange market?
A)net capital outflow
B)national saving
C)exports
D)imports

Question

Quizplus · Accepted Answer

Net capital outflow is the variable that links the market for loanable funds and the foreign-currency exchange market. The net capital outflow represents the net flow of funds from a country to foreign countries in the form of investments in financial assets such as stocks, bonds, and real estate. It represents the difference between a country's domestic saving and domestic investment. When the net capital outflow is positive, it means that a country is investing more abroad than it is receiving from abroad, leading to a supply of domestic currency in the foreign-currency exchange market, which depreciates the domestic currency. Conversely, when the net capital outflow is negative, it means that a country is receiving more from abroad than it is investing abroad, leading to a demand for domestic currency in the foreign-currency exchange market, which appreciates the domestic currency.

What Is the Variable That Links the Market for Loanable