Question 8 The market for loanable funds in country 1 is described by the equations I = 18 - 6r and S = 8+4r; in country 2, it is I = 18 - 4r and S = 8 + 2r. a) Find the relationships between net capital outflow and the world interest rate (rw) in the two countries. b) What is the nature of these relationships? (Are they both positive, both negative, or one positive and the other negative?) c) Calculate the world equilibrium interest rate. d) How can you reconcile the result from part b with the one from part c?

Q: Consider the following open economy SI model set up Y = 18000 C = 300 + 0.8(Y − 2500) I = 3500 −…

A: (a) C = 300 + 0.8(Y-2500) Put Y = 18000 => C = 300 + 0.8(18000 - 2500) => C = 300 + 12400…

Q: Drag the appropriate curve or curves on the following graph to illustrate how this affects the…

A: An exchange rate is the value of one country's currency in terms of another country's currency. It…

Q: 3. Suppose a Canadian agent (investor) with C$1.0 million is choosing between bank deposits…

A: As bartleby guidelines only first 3 part answer..

Q: Without influence from foreign sources of funds, the long-term equilibrium interest rate is term…

A: Let's first analyze the first graph that depicts the market for funds in the US credit…

Q: Refer to the figure above. The curve in graph (b) O shows that the demand for imports is a…

A: NCO {"net capital outflow"} is described as a difference between the investment of domestic assets…

Q: 8. Problems and Applications Q3 The chapter notes that the rise in the U.S. trade deficit during the…

A: An exchange rate is the value of one country's currency in relation to another country's currency.…

Q: 5) Give 3 alternative methods of saving besides traditional US currency that interests you and…

A: Answer: Following are the three alternative methods of saving besides keeping traditional stock of…

Q: Private domestic saving provides the pool of funds available for   Private domestic saving provides…

A: Private domestic savings reffers to those  household savings or personal savings which are  the…

Q: 2.) The country of Albanystan (country A) forms a small open economy on its own. It has savings SA =…

A: CAA is an abbreviation used for the current account of country A. CAB is an abbreviation used for…

Q: The real interest influences the saving decision because

A: Real interest rate refers to interest rate offered by banks to the people who deposit their money in…

Q: 6. If it is announced today that the interest rate in Australia is being reduced from 4% to 3% for…

A: The exchange rate is defined as the representation of the domestic currency in terms of the currency…

Q: In an open economy, the source of the demand for loanable funds is Group of answer choices

A: GIVEN In an open economy, the source of the demand for loanable funds is

Q: Would you usually expect elasticity of demand or supply to be higher in the short run or in the long…

A: Elasticity refers to the responsiveness of one variable to changes in another variable, given that…

Q: 14. Consider a small open economy with the following information: Sd= 30 + 20 r Id= 60 - 10 r Y =…

A: A percentage of the amount charged on borrowers' money is referred to as an interest rate. The…

Q: 23. Suppose the U.S. is operating in an open economy. Suddenly, there is a large decrease in…

A: In an economy, consumer expenditure refers to the total amount of money spent by individuals and…

Q: Consider a hypothetical open economy. The following table presents data on the relationship between…

A: Given information:- Real Interest Rate National Saving Domestic Investment Net Capital…

Q: Consider a hypothetical open economy. The following table presents data on the relationship between…

A:

Q: • Consider the long-run model of a small open economy with perfect capital mobility. araning from an…

A: An economy that in turn participates in international trade, but is considered to be small enough as…

Q: Compare any two of the Foreign Exchange Market (b) Discuss at least two factors that businesses…

A: DISCLAIMER  “Since you have asked multiple question, we will solve the first question for you. If…

Q: Complete the first row of the table to reflect the state of the markets in Mexico. Real Interest…

A: The supply and demand of loanable funds influence an economy's equilibrium interest rate. The…

Q: Consider a hypothetical open economy. The following table presents data on the relationship between…

A: The loanable fund market refers to the form of a market where there is an interaction of borrowers…

Q: Consider a hypothetical open economy. The following table presents data on the relationship between…

A: A balanced budget (particularly that of an organization) is a budget wherein salaries are identical…

Q: (1-4) Assume that consumers all around the world only consume Big Macs at MacDonald's. An American…

A: The objective of the question is to determine the real exchange rate between China and India based…

Q: Because of the relationship between net capital outflow and net exports, the level of net capital…

A: The balance of trade is the difference between the value of a country's exports and the value of its…

Q: Describe the concept of capital flight and its potential consequences for a country's economy and…

A: Capital flight is a critical economic idea that pertains to the development of money and financial…