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 MexicoMexican Net Capital Outflow76Supply4322NCODemand11-1-12 3 41 2 3 4 5LOANABLE FUNDS (Billions of pesos)68-4-3-2-1156NET CAPITAL OUTFLOW (Billions of pesos)Complete the first row of the table to reflect the state of the markets in Mexico.Real Interest RateNet Capital Outflow (NCO)(Percent)(Billions of pesos)Initial stateAfter capital flightREAL INTEREST RATE (Percent)LOREAL INTEREST RATE (Percent)

The demand for loanable funds is composed of NCO and domestic Investment, which cause the demand for…

e 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.

e 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.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 9P

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Question

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 Mexico
Mexican Net Capital Outflow
7
6
Supply
4
3
2
2
NCO
Demand
1
1
-1
-1
2 3 4
1 2 3 4 5
LOANABLE FUNDS (Billions of pesos)
6
8
-4
-3
-2
-1
1
5
6
NET CAPITAL OUTFLOW (Billions of pesos)
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
REAL INTEREST RATE (Percent)
LO
REAL INTEREST RATE (Percent)

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