In an Open Economy, the Source for the Demand for Loanable

question 44

Multiple Choice

In an open economy, the source for the demand for loanable funds is

• A)national saving.
• B)national saving + net capital outflow.
• C)domestic investment.
• D)domestic investment + net capital outflow.

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Definitions:

Interest Rate Parity

A financial theory stating the difference in interest rates between two countries is equal to the expected change in exchange rates between their currencies.

Forward Contract

An agreement to buy or sell an asset at a future date for a price agreed upon today, without the standardization of futures contracts.

Exchange Rate Risk

The potential for investors to experience losses due to changes in the exchange rate between two currencies.

Short-term

This term usually refers to a period of time less than one year, often used in the context of finance for investments or liabilities.