On the following graph, plot the relationship between the real interest rate and net capital outflow by using the green points (triangle symbol) to plot the points from the initial data table. Then use the black point (X symbol) to indicate the level of net capital outflow at the equilibrium real interest rate you derived in the previous graph. REAL INTEREST RATE -20 Net Capital Outflow 10 -5 8 6 -15 0 5 10 -10 NET CAPITAL OUTFLOW (Billions of dollars) 15 20 A NCO + Eqm. NCO (?) Because of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate implies that the economy is experiencing h Ⓡ

On the following graph, plot the relationship between the real interest rate and net capital outflow by using the green points (triangle symbol) to plot the points from the initial data table. Then use the black point (X symbol) to indicate the level of net capital outflow at the equilibrium real interest rate you derived in the previous graph. REAL INTEREST RATE -20 Net Capital Outflow 10 -5 8 6 -15 0 5 10 -10 NET CAPITAL OUTFLOW (Billions of dollars) 15 20 A NCO + Eqm. NCO (?) Because of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate implies that the economy is experiencing h Ⓡ

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Effects of a government budget deficit 2

On the following graph, plot the relationship between the real interest rate and net capital outflow by using the green points (triangle symbol) to plot
the points from the initial data table. Then use the black point (X symbol) to indicate the level of net capital outflow at the equilibrium real interest
rate you derived in the previous graph.
REAL INTEREST RATE
-20
Net Capital Outflow
10
-5
8
6
-15
-10
0
5
10
NET CAPITAL OUTFLOW (Billions of dollars)
15
A
iMessage
20
A
NCO
ri
Eqm. NCO
Because of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate implies
that the economy is experiencing
(?)
MacBook Air

Because of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate implies
that the economy is experiencing
Now, suppose the government is experiencing a budget deficit. This means that
to
loanable funds.
After the budget deficit occurs, suppose the new equilibrium real interest rate is 7%. The following graph shows the demand curve in the foreign-
currency exchange market.
Use the green line (triangle symbol) to show the supply curve in this market before the budget deficit. Then use the purple line (diamond symbol) to
show the supply curve after the budget deficit.
REAL EXCHANGE RATE
20
Market for Foreign-Currency Exchange
10
A
iMessage
-A
Initial Supply
4
Supply with Deficit
MacBook Air
which leads
(?)
DII
a
F11
A-Z
A+
1
F12

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