Two Nations Are Located Next to One Another

question 4

Multiple Choice

Two nations are located next to one another.In Nation A,people are very thrifty and spend much less than their incomes; moreover,Nation A's government runs a balanced budget every year.In Nation B,people spend all of their incomes,but their government runs consistent deficits.Thus,

• A) Nation A's extra savings would increase the supply of loanable funds to Nation B.
• B) Nation B's government deficit would be a supply of loanable funds to Nation B.
• C) Nation A's extra savings would increase the demand for loanable funds in Nation B.
• D) Nation B would instantly default on all of its debt obligations.
• E) Nation A's extra savings would decrease the supply of loanable funds to Nation B.

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