posted by Macroeconomics on .
Japan, the European Union, Canada, and Mexico have flexible exchange rates.
Suppose Japan attracts an increased amount of investment from the European Union.
Using a correctly labeled graph of the loanable funds market in Japan, show the effect of the increase in foreign investment on the real interest rate in Japan.
MY QUESTION: My doesn't DEMAND shift right for Japan's foreign investment? (correct answer is that supply shifts right)
AD shifts right overall, but in the market for loanable funds the supply shifts right, because at any given interest rate, there will be more loanable funds available