Which of the following is the supply and demand for loanable funds equation in an open economy?
A)S = I
B)S = NX + NCO
C)S = NCO
D)S = I + NCO

Question

Quizplus · Accepted Answer

In an open economy, savings (S) can be used for both domestic investment (I) and net capital outflow (NCO). Therefore, the equation for the supply and demand for loanable funds in an open economy is S = I + NCO. Choice A represents the closed economy equation for supply and demand for loanable funds, while choices B and C do not reflect the relationship between domestic investment and net capital outflow.

Which of the Following Is the Supply and Demand for Loanable