Question

In an open economy, the demand for loanable funds comes from

a. only those who want to buy domestic capital goods.
b. only those who want to buy foreign assets.
c. those who want to buy either domestic capital goods or foreign assets.
d. None of the above is correct.

Answer 1

Option C.

Step-by-step explanation:

Those who want to acquire reserves to get either national capital goods or imported assets, is the right answer.

In an open economy, the activities take place between the national and outside community. People and even companies can exchange goods and services with other personalities and companies in the global community, and reserves can run as investments across the boundary. However, the demand for loan-able reserves comes from those who want to acquire reserves to get either national capital goods or imported assets.