Figure 3 Refer to the following diagram of the open-economy macroeconomic model to answer the questions that follow. Graph (a) Graph (b) REAL INTEREST RATE 525 d $ QUANTITY OF LOANABLE FUNDS REAL EXCHANGE RATE stay at r2. b. decrease because supply would shift right. c. increase because supply would shift left. d. decrease because demand would shift left. REAL INTEREST RATE NCO D. d NET CAPITAL OUTFLOW Graph (c) S, 5, 5, D 3 QUANTITY OF DOLLARS Refer to Figure 3. If the interest rate were initially at r2 and an import quota were imposed, the interest rate would a.

Figure 3 Refer to the following diagram of the open-economy macroeconomic model to answer the questions that follow. Graph (a) Graph (b) REAL INTEREST RATE 525 d $ QUANTITY OF LOANABLE FUNDS REAL EXCHANGE RATE stay at r2. b. decrease because supply would shift right. c. increase because supply would shift left. d. decrease because demand would shift left. REAL INTEREST RATE NCO D. d NET CAPITAL OUTFLOW Graph (c) S, 5, 5, D 3 QUANTITY OF DOLLARS Refer to Figure 3. If the interest rate were initially at r2 and an import quota were imposed, the interest rate would a.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter23: The International Trade And Capital Flows

Section: Chapter Questions

Problem 46P: Imagine that the economy of Germany finds itself in the following situation: the government budget...

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Imagine that the economy of Germany finds itself in the following situation: the government budget has a surplus of 1 of Germanys GDP; private savings is 20 of GDP; and physical investment is 18 of GDP. Based on the national saving and investment identity, what is the current account balance? If the government budget surplus falls to zero, how will this affect the current account balance?
Explain the relationship between a current account deficit or surplus and the flow of funds.
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…
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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
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Suppose that the government decides to cut spending. In a three graphs diagram, show theimpact of this policy on real interest rate, national saving, investment, net capital outflows,demand for currency (NX), and supply of currency? Will the currency appreciate ordepreciate?