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21 July, 15:59

Select the true statement or statements regarding the loanable funds market. Foreign entities cannot save in the United States. Savings refers to savings accounts held in banks only. The purchase of stocks and bonds is considered savings. Savings from households are used by firms and governments to finance investment.

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  1. 21 July, 16:14
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    Solution:

    The following are the correct and incorrect options

    Correct option: Households used to save and those savings are utilized for investment through the intermediaries like bank. Firms and governments take those funds for their investment acts.

    Correct option: Foreigner can invest in the US (suppose foreign direct investment) but can't save here, since there is difference in currency (suppose a foreigner earns in pond can't save in US dollar).

    Other options are not correct:

    Incorrect option: Savings means personal savings, which are not yet kept into a bank.

    Incorrect option: such purchases are investments but not savings.
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