The impact of the interest rate on investment.

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Chapter 18, Problem 6PA

Subpart (a):

To determine

The impact of the interest rate on investment.

Subpart (b):

To determine

The impact of the interest rate on investment.

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Recently, the economies of China and India have begun to grow very rapidly. This increases their citizens’ income and wealth. In turn, these citizens increase their savings in their country and also in the United States. a. When foreign savings enter the U.s. loanable funds market, which curve is affected—supply or demand? How is this curve affected? b. How would you graph the U.s. loanable funds market both before and after the increase in foreign savings? c. How does the change in foreign savings affect both investment and future output in the United states?

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