3. Effects of a government budget deficit Suppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between different real interest rates and this economy's levels of national saving, domestic investment, and net capital outflow. Assume that the economy is currently operating under a balanced government budget. Real Interest Rate (Percent) REAL INTEREST RATE 10 00 2 0 7 6 5 4 0 3 2 National Saving (Billions of dollars) 65 60 55 50 Given the information in the table above, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. ? 45 40 20 Market for Loanable Funds 40 80 60 QUANTITY OF LOANABLE FUNDS Domestic Investment (Billions of dollars) 15 25 35 45 55 65 100 Net Capital Outflow (Billions of dollars) -10 -5 0 Demand Supply + 5 10 15 Equilibrium
3. Effects of a government budget deficit Suppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between different real interest rates and this economy's levels of national saving, domestic investment, and net capital outflow. Assume that the economy is currently operating under a balanced government budget. Real Interest Rate (Percent) REAL INTEREST RATE 10 00 2 0 7 6 5 4 0 3 2 National Saving (Billions of dollars) 65 60 55 50 Given the information in the table above, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. ? 45 40 20 Market for Loanable Funds 40 80 60 QUANTITY OF LOANABLE FUNDS Domestic Investment (Billions of dollars) 15 25 35 45 55 65 100 Net Capital Outflow (Billions of dollars) -10 -5 0 Demand Supply + 5 10 15 Equilibrium
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: Savings,investment And The Financial System
Section: Chapter Questions
Problem 8PA
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