Let's say that real interest rates rise throughout Europe. At all U.S. real interest rates, this scenario will result in a greater net outflow of American capital. As a result, the demand for loanable funds rises since that curve's component, the net capital outflow is a function of this.
Increased net capital outflow from the United States results from higher real interest rates in Europe because they attract Americans to invest in European assets while discouraging Europeans from doing the same.
Whether a capital asset is located domestically (as a domestic investment) or abroad, the acquisition of a capital asset increases the demand for loanable money (as net capital outflow). As a result, the increasing real interest rates across Europe enhance the demand for loanable money.
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