Refer to the following diagram of the open-economy macroeconomic model to answer the questions that follow.Graph (a)Graph (b)REAL INTEREST RATEadbS₁QUANTITY OF LOANABLE FUNDSREAL EXCHANGE RATEREAL INTEREST RATE1.501.251.000.750.50NCONET CAPITAL OUTFLOWGraph (c)D₁S₁ S₂ S₂hkQUANTITY OF DOLLARSA). The initial effect of an increase in the budget deficit in the loanable funds market shown in graph (a) can beillustrated as a move from point b toB). In the market for foreign-currency exchange, the effects of an increase in the budget surplus shown in graph(c) can be illustrated as a move from j to

This question asked us to understand the effects of changes in the budget deficit and surplus on…

Refer to the following diagram of the open-economy macroeconomic model to answer the questions that follow. Graph (a) Graph (b) REAL INTEREST RATE C a d b S₁ S₂ QUANTITY OF LOANABLE FUNDS REAL EXCHANGE RATE REAL INTEREST RATE 1.25 i 1.00 0.75 0.50 NCO NET CAPITAL OUTFLOW Graph (c) D₁ S₁ S₂ S₂ D₂ A QUANTITY OF DOLLARS A). The initial effect of an increase in the budget deficit in the loanable funds market shown in graph (a) can be illustrated as a move from point b to B). In the market for foreign-currency exchange, the effects of an increase in the budget surplus shown in graph (c) can be illustrated as a move from j to

Refer to the following diagram of the open-economy macroeconomic model to answer the questions that follow. Graph (a) Graph (b) REAL INTEREST RATE C a d b S₁ S₂ QUANTITY OF LOANABLE FUNDS REAL EXCHANGE RATE REAL INTEREST RATE 1.25 i 1.00 0.75 0.50 NCO NET CAPITAL OUTFLOW Graph (c) D₁ S₁ S₂ S₂ D₂ A QUANTITY OF DOLLARS A). The initial effect of an increase in the budget deficit in the loanable funds market shown in graph (a) can be illustrated as a move from point b to B). In the market for foreign-currency exchange, the effects of an increase in the budget surplus shown in graph (c) can be illustrated as a move from j to

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 8P

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In the late 1990s, the U.S. government moved from a budget deficit to a budget surplus and the trade deficit in the U.S. economy grew substantially. Using the national saving and investment identity, what can you say about the direction in which saving on/or investment must have changed in this economy?
The following graphs depict the market for loanable funds and the relationship between the real interest rate and the level of net capital outflow (NCO) measured in terms of the Mexican currency, the peso. The Market for Loanable Funds in MexicoDemandSupply012345678987654321REAL INTEREST RATE (Percent)LOANABLE FUNDS (Billions of pesos)Demand Supply Mexican Net Capital OutflowNCO-4-3-2-10123456987654321REAL INTEREST RATE (Percent)NET CAPITAL OUTFLOW (Billions of pesos)NCO Complete the first row of the table to reflect the state of the markets in Mexico. Real Interest Rate Net Capital Outflow (NCO) (Percent) (Billions of pesos) Initial state After capital flight Now, suppose that Mexico experiences a sudden bout of political turmoil, which causes world financial markets to become uneasy. Because people now view Mexico as unstable, they decide to pull some of their assets out of Mexico and put them into more…
7 1) Suppose that the government spending decreases. Use the model of loanable funds in a closed economy to explain clearly what happens to the quantity of national savings, public savings, private savings, investment, consumption, and the interest rate: Illustrate the answer with the appropriate graph.
*Draw graph and will the interest rate be the same Canadian economy has struggled with Covid pandemic crisis. However, numerous economic forecasts that the economy will soon enter an expansion. What is the likely effect of the expansion on the expected profitability of new investment in plant and equipment? Using loanable funds model, illustrate (graph) and explain the effect of the forecast of an economic expansion, assuming that both borrowers and lenders believe the forecast is accurate. What happens to the equilibrium (real) interest rate and the quantity of loanable funds? What happens to the quantity of saving and investment?
Figure 32-4 Refer to the following diagram of the open- economy macroeconomic model to answer the questions that follow. REAL INTEREST RATE a to b. b to a. a to c. Graph (a) Od to a. с d b Refer to Figure 32-4. The initial effect of an increase in the budget deficit in the loanable funds market shown in graph (a) can be illustrated as a move from S₁ S₂ QUANTITY OF LOANABLE FUNDS REAL INTEREST RATE 88 TE 1.50 1.25 0.75 Graph (b) NCO NET CAPITAL OUTFLOW Graph (c) D₁ S₁ S₂ S₂ D₂ QUANTITY OF DOLLARS
Indicate the Quantity demanded and Quantity supplied of loanable funds if the Interest rates increases by 2% (from the equilibrium rate). would changed in interest rate cause a movement along the curve or shift? Interest rate 24% 22 20 ' 18 16 14 12 10 a 6 4 2 Y S ° $200 $400 600 D 800 1,000 1,200 Quantity of leanable funds (billions of dollars) Indicate the Quantity demanded and Quantity supplied of loanable funds if the Interest rates increases by 2% (from the equilibrium rate). would changed in interest rate cause a movement along the curve or shift?
During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would shift: a. the demand for loanable funds left and shift the supply of dollars in the market for foreign-currency exchange right. b. both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange right. c. both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange left. d. the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange left.
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.
View History Bookmarks Tools Window Help Coy, Jonnifer - Outlo X C Martin County School District X S MyPath - Home Content https://ezto.mheducation.com/ ext/map/index.html?_con%3Dcon&external_browser%3D0&launchUrl=https%25 Saved Level of Output and Income (GDP= DI) Consumption Saving APC APS MPC MPS S480. $-16 520 560 16 60 32 640 48 680 64 720 80 760 96 800 112 Des Instructions: Enter your answer as a whole number. b. What is the break-even level of income in the table? What is the term that economists use for the saving situation shown at the $480 level of income? (Click to select) Y c. For each of the following items, indicate whether the value in the table is either constant or variable as income chanc The MPS: (Click to select) The APC: (Click to select) The MPC: (Click to select) The APS: (Click to select) aw Prev 1 of 1 JAN 11 %24
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 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
Draw the loanable funds market for 30-year fixed rate mortgages with the equilibrium rate at 5.13% and the equilibrium total amount of mortgages at $12.0 trillion. a> For the sake of simplicity, assume that mortgages are issued and financed through “banks” (I know some of you work in the mortgage, real estate, or finance industry and know the minute details of the mortgage market, but let’s just keep it simple). If people are willing to save more money in “banks,” how will this market be affected? (i.e., which curve(s) will shift, and in which direction?) b> What will happen to the equilibrium quantity of loans after the event in part a? What will happen to the equilibrium interest rate for 30-year fixed rate mortgages after the event in part a?
Other things equal, an increase in the U.S. netcapital outflow _________ the demand for loanablefunds and _________ the supply of dollars in themarket for foreign currency exchange.a. increases; increasesb. increases; decreasesc. decreases; increasesd. decreases; decreases