Question 1 The world financial crisis of 2008-2009 began in the U.S. subprime mortgage market, and quickly spread around the world. This recession led to a large decrease in the economy of the US. and the Euro area. As a result, there was a substantial decrease in spending in these countries: a.What is the impact of a decrease in spending in these countries on the world savings and world interest rates? b.Now, show graphically the effects of this contractionary spending abroad on the market for loanable funds and on the foreign currency market in Japan (a large open economy). Be sure to label: i. the axes; ii. the curves; ii. the initial equilibrium values, iv. the direction the curves shift; and v. the new long-run equilibrium values c. State and explain what the long run impact of this global recession was on Japan's: real interest rates, levels of investment, real output, net foreign investment, real exchange rates (O) and trade balance (NX).

Question 1 The world financial crisis of 2008-2009 began in the U.S. subprime mortgage market, and quickly spread around the world. This recession led to a large decrease in the economy of the US. and the Euro area. As a result, there was a substantial decrease in spending in these countries: a.What is the impact of a decrease in spending in these countries on the world savings and world interest rates? b.Now, show graphically the effects of this contractionary spending abroad on the market for loanable funds and on the foreign currency market in Japan (a large open economy). Be sure to label: i. the axes; ii. the curves; ii. the initial equilibrium values, iv. the direction the curves shift; and v. the new long-run equilibrium values c. State and explain what the long run impact of this global recession was on Japan's: real interest rates, levels of investment, real output, net foreign investment, real exchange rates (O) and trade balance (NX).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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