Suppose the equilibrium interest rate in the U.S. market for loanable funds is 3% prior to any international capital flows in the United States. The equilibrium interest rate in the Japanese market for loanable funds is 7%. If lenders in both nations believe that loans to foreigners are just as good as loans to their own citizens, capital will flow from _____, making interest rates _____ in Japan and _____ in the United States.
A) the United States to Japan; rise; fall
B) Japan to the United States; fall; rise
C) Japan to the United States; rise; fall
D) the United States to Japan; fall; rise
Correct Answer:
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