Explain about the following graphs:Figure 7 The Effects of Capital Flight(a) The Market for Loanable Funds in MexicoDI Mexican Net Capital OutflowRealInderestReal1. An inoreaaein net capitaloutlow..SuppiyInterestRateRate3...whichIncreaseshe intareatrate2....increases the damandfor loanable tunds.QUantry ofLoanable FundsNet CapitalOutflowRealExchangeRate4. A the sametime, he increaseNin nat capitaloutfowIncreases fhesupply af pasas.6....whichEcauses hepesotodepredateDemandQuansty ofPesos(C) The Market for Foreign-Currency ExchangeCopyright2003 Soutwem/Thomacn Leamirg

Capital flight: It refers to the outflow of capital from a country when an economy is declining or…

Explain about the following graphs: Figure 7 The Effects of Capital Flight (a) The Market for Loanable Funds in Maxico DI Mexican Net Capital Outflow Real Interest Real nterest 1. An inareaae n net capital outon. Suppiy Rate Rate 3..which ncreases ne intareat rate 2... .ncreases the damand for loanable tunds... Quantty of Loanatle Funds Net Capital Outflow Real Exchange Rate 4. AL the same time, he increase in nat captal outfow Increases fhe aupply af pasas. 6....which causes he pesoto depredate. Demand Quandity of Pesos (C) The Market for Foreign-Currency Exchange Copyrigh2003 Southweem/Thomacn Leaming

Explain about the following graphs: Figure 7 The Effects of Capital Flight (a) The Market for Loanable Funds in Maxico DI Mexican Net Capital Outflow Real Interest Real nterest 1. An inareaae n net capital outon. Suppiy Rate Rate 3..which ncreases ne intareat rate 2... .ncreases the damand for loanable tunds... Quantty of Loanatle Funds Net Capital Outflow Real Exchange Rate 4. AL the same time, he increase in nat captal outfow Increases fhe aupply af pasas. 6....which causes he pesoto depredate. Demand Quandity of Pesos (C) The Market for Foreign-Currency Exchange Copyrigh2003 Southweem/Thomacn Leaming

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 9P

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If a country is running a government budget surplus, why is (T - G) on the left side of the saving-investment identity?
3.a. If a country experiences a substantial increase in Net Capital Inflow, how do you think themarket of loanable funds will change in that country? Drawing a diagram explain whathappens to interest rate. b. Your friend tells you that he has read in an article that a country’s private sector might getinto trouble if the government keeps on borrowing from the private sector. Drawing adiagram for the markets of loanable finds, show your friend why this might be the case. Alsoreport the name of this phenomenon.
Explain how the following transactions would affectU.S. net capital outflow. For each transaction, statewhether it represents direct investment or portfolioinvestment.a. An American cellular phone company establishesan office in the Czech Republic.b. Harrods of London sells stock to the GeneralMotors pension fund.c. Honda expands its factory in Marysville, Ohio.d. A Fidelity mutual fund sells its Volkswagen stockto a French investor.
Imagine that the U.S. economy finds itself in the followingsituation:agovernmentbudgetdeficitof$100 billion, total domestic savings of $1,500 billion, and total domestic physical capital investment of $1,600 billion.Accordingtothenationalsavingandinvestment identity,whatwillbethecurrentaccountbalance?What willbethecurrentaccountbalanceifinvestmentrisesby $50billion,whilethebudgetdeficitandnationalsavings remain the same?
Suppose the government of Australia incurs a budget deficit of $50 billion due to increased government spending in 2020 as result of Covid 19. Because of this, the government borrowing in 2021 increases by the same amount. a. Show this development using a graph representing the market for loanable funds for Australia. Explain in writing and using a graph the effect of this on interest rates. b. Compare the size of equilibrium changes in 1) investment, 2) public saving, 3) private saving and 4) national saving (public saving + private saving) with $50 billion increase in borrowing. Compare the changes (increase/decrease) in these variables indicating same, less or more than the $50 billion. c. Will the equilibrium quantity of national savings change by more or less than the initial change in public saving? Explain your answer (in 50 words…
In the Market for Loanable Funds, what was the result of "crowding out"? Lower interest rates, higher quantity of loanable funds available. O Higher interest rates, lower quantity of loanable funds available. O Higher interest rates, higher quantity of loanable funds available. O Lower interest rates, lower quantity of loanable funds available. 1036 20 1 T FM 300-E WE WEREDAL HOP 3 22 201 en 50203213277 nem materiale Antent in parte ed anch
Use the analysis for the market for loanable funds diagram to illustrate and explain how thefollowing government policy affect the economy’s saving and investment. Policy 1: Suppose thegovernment changes the tax code, allowing individuals to reduce their taxable income if they savemoney in registered retirement savings plans (RRSPs). Your response should answer the following questions:a. State and explain which loanable funds curve would this policy affect? b. Which way would the loanable funds curve shift? c. What would be the impact on interest rates? Draw the loanable funds diagram to illustrate your answers for a to c.
Consider the following data (in billion $) for a country in a particular year: (assume this country has Zero Transfer Payment Personal consumption expenditure (C) 200 Exports (x) 10 Government Purchases of goods and services (G) 120 Imports (m) 15 Gross Domestic Product (Y) 1800 Taxes 20 d. What is the value of gross investment? e. What is the value of net export? f. Is the country lending to or borrowing from rest of the world? g. Dose the government has deficit, balance or surplus budget? h. What is the amount of investment financed by national saving? i. What is the amount of investment financed by borrowing from rest of the world? J. What is the meaning of transfer payment
Use the analysis for the market for loanable funds diagram to illustrate and explain how thefollowing government policy affect the economy’s saving and investment. Policy 1: Suppose the government changes the tax code, allowing individuals to reduce their taxable income if they save money in registered retirement savings plans (RRSPs). Your response should answer the following questions: a. State and explain which loanable funds curve would this policy affect? b. Which way would the loanable funds curve shift? c. What would be the impact on interest rates? Draw the loanable funds diagram to illustrate your answers for a to c.
Real Interest A Ra te World interest rate, fo Real Exchange Ra te Ex E Ę₂ Supply of Loare ble Funds Derrand for Loa rable Funds Quantity of Loanable Funds Supply of Canadian Dollars (5-1) D₁ Do Quantity of Dollars Refer to the Figure 13-2. Suppose that these diagrams refer to Canada. If the interest rate was initially at r0 and Japan voluntarily restricted its exports to Canada, what would happen to the interest rate? a. It would stay at r0. O b. It would decrease because supply would shift right. OC. It would increase because supply would shift left. O d. It would decrease because demand would shift left. Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.
2. Given: C = 250 + 0.8 Y I = 150G = 300TR = 100 NX = 100t =0.25 1.Give an example related to current Bangladeshi situation where the government may follow a 'Transfer Promoting Policy' instead of a 'Growth Promoting Policy' in determining who gets the transfer payment. 2.Instead of paying transfer (TR) if the government were to increase government spending (G), what type of crowding out would you expect? Briefly explain. 3.As we have observed recently that, a lot of the assistance from the government is being misappropriated by dishonest individuals and as a result is not reaching the target population. What role can proper institution play to rectify such mishandling of government fund? Explain.
In the economy of Carpathia: Consumption =850 billion Government purchase of goods and services = 100 billion Import = 125 billion Investment spending= 75 billion Exports = 100 billion. Taxes= 50 billion —There are no government transfers payment. — set an open a close economy given the provided data table? —Compute the following based on the data in the table above. A) GDP in Carpathia B) National savings in Carpathia: C) Net capital inflow into Carpathia: D) The savings-investment spending identity for the Carpathian economy