Case Interview Prep

Category - Economics

The market for loanable funds is represented by the equation below. What does NCO stand for?
S = I + NCO
  1. national credit output
  2. national capital outflows
  3. net credit output
  4. net capital outflows
Explanation
Answer: D - NCO stands for net capital outflows.

Key Takeaway: At the equilibrium interest rate, the amount that people save is equal to the desired quantities of investment and the net capital outflows. NCO is the imbalance between the purchases and sales of capital assets.
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