This is the second part of the previous question I asked, I either get most right or wrong Given the change in the real interest rate, show the effect this has on net capital outflow.NCOMovable PointNCONet Capital OutflowWhich of the following is true as a result of this policy? Check all that apply.The real exchange rate will rise.The equilibrium level of net exports will rise.The supply of dollars in the foreign exchange market will increase.Real Interest Rate Suppose the United States decides to reduce export subsidies on U.S. agricultural products, but it does not decrease taxes or increase any othergovernment spending.Initially, a reduction in export subsidies decreases net exports at any given real exchange rate, causing the demand for dollars in the foreign exchangemarket to decrease. This leads to a decrease in the real exchange rate, which, in turn, decreases imports to negate any decrease in exports, leavingthe equilibrium quantity of net exports and the trade deficit unchanged at this point.However, the reduction in expenditure on export subsidiesthe fiscal deficit, therebypublic saving.On the following graph, indicate the effect this has on the U.S. market for loanable funds.SupplyDemandSupplyDemandQuantity of Loanable FundsReal Interest Rate

Exchange rate, net exports, capital flow, government expenditure are all interconnected.

uppose tne Onited States decides to reduce export agricuiturai products, but it dde government spending. nitially, a reduction in export subsidies decreases net exports at any given real exchange rate, causing the demand for dollars in the foreign exchange market to decrease. This leads to a decrease in the real exchange rate, which, in turn, decreases imports to negate any decrease in exports, leaving the equilibrium quantity of net exports and the trade deficit unchanged at this point. However, the reduction in expenditure on export subsidies v the fiscal deficit, thereby public saving. On the following graph, indicate the effect this has on the U.S. market for loanable funds. Supply Demand Supply Demand Quantity of Loanable Funds Real Interest Rate

uppose tne Onited States decides to reduce export agricuiturai products, but it dde government spending. nitially, a reduction in export subsidies decreases net exports at any given real exchange rate, causing the demand for dollars in the foreign exchange market to decrease. This leads to a decrease in the real exchange rate, which, in turn, decreases imports to negate any decrease in exports, leaving the equilibrium quantity of net exports and the trade deficit unchanged at this point. However, the reduction in expenditure on export subsidies v the fiscal deficit, thereby public saving. On the following graph, indicate the effect this has on the U.S. market for loanable funds. Supply Demand Supply Demand Quantity of Loanable Funds Real Interest Rate

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter4: The Aggregate Economy

Section: Chapter Questions

Problem 5E

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