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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

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BuyFindarrow_forward

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
Chapter 19.1, Problem 1QQ
Textbook Problem
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Describe the sources of supply and demand in the market for loanable funds and the market for foreign-currency exchange.

To determine
The supply and demand for lonable funds in the foreign exchange market.

Explanation of Solution

The foreign exchange market is the place of market where the participants are able to buy and sell the different foreign currencies with exchange to the domestic currency. Here, the lonable fund interest rate theory applies. The lonable fund includes all the forms of credit of the economy, which includes the loans, bonds, and the savings deposits.

The lonable fund supply is from the national savings of the economy. The national savings of the economy is the summation of the private savings and the government savings of the economy...

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