Which of the following statements regarding the loanable-funds market is not true?

To determine which statement regarding the loanable-funds market is not true, let's analyze each one:

a. An increase in a country's net capital outflow raises its real interest rate.

• This statement is generally false. An increase in net capital outflow indicates that more capital is being invested abroad than is coming in, which typically increases the supply of funds in the domestic market. This often leads to a decrease in the real interest rate rather than an increase.

b. An increase in domestic investment shifts the demand for loanable funds to the right.

• This statement is true. As domestic investment increases, the demand for loanable funds increases because businesses need to borrow more to finance their investments.

c. A decrease in a country's net capital outflow shifts the demand for loanable funds to the left.

• This statement is generally true. A decrease in net capital outflow means that less money is being invested abroad and more capital might be staying domestic, which can reduce demand for loanable funds.

d. An increase in a country's net capital outflow shifts the supply of loanable funds to the left.

• This statement is false. An increase in net capital outflow means that there are more funds available for lending domestically as more capital is converted into foreign investments, which would actually shift the supply of loanable funds to the right, not the left.

Based on the analysis, statements (a) and (d) are incorrect in the context provided. However, if we are to select just one statement that is clearly false based on typical economic theory, option a is the best candidate as it explicitly states that net capital outflow raises the real interest rate, which typically is not the case.