On the following graph, plot the relationship between the real interest rate and net capital outflow by using the green points (triangle symbol) to plotthe points from the initial data table. Then use the black point (X symbol) to indicate the level of net capital outflow at the equilibrium real interestrate you derived in the previous graph.REAL INTEREST RATE-20Net Capital Outflow10-5862-15-100510NET CAPITAL OUTFLOW (Billions of dollars)1520NCO++Eqm NCOBecause of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate impliesthat the economy is experiencingNow, suppose the government is experiencing a budget deficit. This means thatloanable funds.which leads to Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving,domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currentlyexperiencing a balanced government budget.REAL INTEREST RATE10Real Interest Rate(Percent)7662054302National Saving(Billions of dollars)65602055504540Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points(square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market.?Market for Loanable Funds4060QUANTITY OF LOANABLE FUNDS80Domestic Investment(Billions of dollars)303540451005056ODemand1Supply1Net Capital Outflow(Billions of dollars)-10-5Equilibrium051015

Net capital outflow (NCO) is the net progression of assets being contributed abroad by a country…

20 Net Capital Outflow 10 -5 8 9 -15 -10 0 5 10 NET CAPITAL OUTFLOW (Billions of dollars) 15 20 NCO Eqm NCO of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest economy is experiencing opose the government is experiencing a budget deficit. This means that loanable funds. F which lea

20 Net Capital Outflow 10 -5 8 9 -15 -10 0 5 10 NET CAPITAL OUTFLOW (Billions of dollars) 15 20 NCO Eqm NCO of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest economy is experiencing opose the government is experiencing a budget deficit. This means that loanable funds. F which lea

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter29: Exchange Rates And International Capital Flows

Section: Chapter Questions

Problem 6SCQ: A booming economy can attract financial capital inflows, which promote further growth. However,...

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A booming economy can attract financial capital inflows, which promote further growth. However, capital can just as easily flow out of the country, leading to economic recession. Is a country whose economy is booming because It decided to stimulate consumer spending more or less likely to experience capital flight than an economy whose boom Is caused by economic investment expenditure?
Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 50 25 -15 6 45 35 -10 5 40 45 -5 4 35 55 0 3 30 65 5 2 25 75 10 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. Market for Loanable FundsDemandSupplyEquilibrium0204060801001086420REAL INTEREST RATEQUANTITY OF LOANABLE FUNDS…
Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 40 25 -15 6 35 30 -10 5 30 35 -5 4 25 40 0 3 20 45 5 2 15 50 10 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market.
Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 60 25 -10 6 55 30 -5 5 50 35 0 4 45 40 5 3 40 45 10 2 35 50 15 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. On the following graph, plot the relationship between the real…
Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 45 25 -10 6 40 30 -5 5 35 35 0 4 30 40 5 3 25 45 10 2 20 50 15 3. Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National…
Economics Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 60 30 -10 6 55 40 -5 5 50 50 0 4 45 60 5 3 40 70 10 2 35 80 15 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market.
Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Because of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate implies that the economy is experiencing___________ .Now, suppose the government is experiencing a budget deficit. This means that _________, which leads to ___________loanable funds.After the budget deficit occurs, suppose the new equilibrium real interest rate is 6%. The following graph shows the demand curve in the foreign-currency exchange market.
Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the dollar. Assume that the economy is currently experiencing a balanced government budget. NOTE: follow RED ARROWS for the order of the questions (IT IS PART OF THE SAME QUESTION!!!!!) NOTE: HERE ARE THE OPTIONS FOR THE BLANKS: Because of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate implies that the economy is experiencing _____ (a trade deficit OR balanced trade OR a trade surplus) Now, suppose the government is experiencing a budget deficit. This means that ______ (national saving will increase OR national saving will decrease OR domestic investment will increase OR domestic investment will decrease), which leads to ______ (an increase in the supply of OR…
Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 55 25 -10 6 50 35 -5 5 45 45 0 4 40 55 5 3 35 65 10 2 30 75 15 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market.
Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 40 30 -20 6 35 35 -15 5 30 40 -10 4 25 45 -5 3 20 50 0 2 15 55 5 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. Because of the relationship between net capital outflow and net…
Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 50 30 -20 6 45 40 -15 5 40 50 -10 4 35 60 -5 3 30 70 0 2 25 80 5 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. Market for Loanable…
Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 40 25 -15 6 35 30 -10 5 30 35 -5 4 25 40 0 3 20 45 5 2 15 50 10 On the following graph, plot the relationship between the real interest rate and net capital outflow by using the green points (triangle symbol) to plot the points from the initial data table. Then use the black point (X symbol) to indicate the level of net capital outflow at the equilibrium real interest rate you derived in the previous graph. Because of the…