Figure 32-5
Refer to this diagram of the open-economy macroeconomic model to answer the questions below.
-Refer to Figure 32-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by
A) shifting the demand curve in panel a to the right and the demand curve in panel c to the left.
B) shifting the demand curve in panel a to the right and the supply curve in panel c to the left.
C) shifting the supply curve in panel a to the right and the demand curve in panel c to the left.
D) shifting the supply curve in panel a to the right and the supply curve in panel c to the right.

Question

Figure 32-5
Refer to this diagram of the open-economy macroeconomic model to answer the questions below. 
-Refer to Figure 32-4. Suppose that U.S. firms desire to purchase more capital in the U.S. The effects of this could be illustrated by
A) shifting the demand curve in panel a to the right and the demand curve in panel c to the left. 
B) shifting the demand curve in panel a to the right and the supply curve in panel c to the left. 
C) shifting the supply curve in panel a to the right and the demand curve in panel c to the left. 
D) shifting the supply curve in panel a to the right and the supply curve in panel c to the right.

Quizplus · Accepted Answer

When U.S. firms desire to purchase more capital, the demand for loanable funds increases, shifting the demand curve in panel a to the right. This increased demand for domestic investment reduces the supply of loanable funds available for foreign investment, shifting the supply curve in panel c to the left.

Figure 32-5 Refer to This Diagram of the Open-Economy Macroeconomic Model to Model