Final answer:
a. US exports to Britain will likely decrease. b. Financial capital is likely to flow towards the US. c. The supply of loanable funds in the US will likely decrease.
Step-by-step explanation:
a. US exports to Britain will likely decrease. When the Bank of England decreases its discount rate, it makes it cheaper for British banks to borrow money, which in turn leads to a decrease in interest rates. This makes it more attractive for British consumers to borrow money to make purchases, which can result in an increase in British spending on domestically produced goods and a decrease in demand for imported goods from the US.
b. Financial capital is likely to flow towards the US. When the FRF (Federal Reserve System) increases interest on reserves, it incentivizes banks to hold onto their reserves instead of lending them out. This can result in a decrease in lending activity and potential increase in interest rates in Britain, making the US a more attractive destination for foreign investors seeking higher returns.
c. The supply of loanable funds in the US will likely decrease. When the Bank of England decreases its discount rate, it stimulates borrowing in Britain, which can lead to an increase in demand for loans. This increased demand for loans can drive up interest rates in the US, making it more expensive for businesses and consumers to borrow money, thus decreasing the supply of loanable funds.