Show how this change affects the quantity of loanable funds


Suppose that in a large open economy, the quantity of loanable funds supplied domestically is initially equal to the quantity of funds demanded domestically. Then an increase in business taxes discourages investment.

Show how this change affects the quantity of loanable funds and the world real interest rate. Does the economy now borrow or lend internationally?

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Financial Management: Show how this change affects the quantity of loanable funds
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