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)
AP Macroeconomics -
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