Which of the following statements regarding the loanable funds market is not true ?
Correct answer: C. An increase in a country's net capital outflow shifts the supply of loanable funds to the left
- A. A decrease in a country's net capital outflow shifts the demand for loanable funds to the left
- B. An increase in domestic investment shifts the demand for loanable funds to the right
- C. An increase in a country's net capital outflow shifts the supply of loanable funds to the left
- D. An increase in a country's net capital outflow raises its real interest rate
Explanation
Net capital outflow is part of the demand for loanable funds because it represents funds invested abroad. Therefore, an increase in net capital outflow shifts demand right, not supply left, making statement c false.
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