Final answer:
The sum of national savings represents the supply of financial capital. It influences the demand and supply of loanable funds. The correct answer is C.
Step-by-step explanation:
The sum of national savings is the total of domestic savings by households, companies, and the government. It represents the supply of financial capital in the market. National savings can influence the demand and supply of loanable funds, as it affects the quantity of financial capital demanded for making investments.
National savings constitute the supply of loanable funds in financial capital markets, encompassing private and public savings and any foreign capital from trade deficits.
The sum of national savings is the supply of loanable funds. National savings include both private and public savings, and they provide the funding for borrowers in financial capital markets. When considering the national saving and investment identity, which balances the supply and demand for financial capital, the sum of a country's domestic savings by households, companies, and government budget surpluses, along with any money entering the country from abroad—such as when running a trade deficit—is considered part of the supply side of this equation. Conversely, domestic investment by companies and borrowing by the government or individuals represent the demand for loanable funds. This identity underlines that the total quantity of financial capital demanded must always equal the total quantity of financial capital supplied.