REAL INTEREST RATEThe following graph shows the market for loanable funds in Ouvert, a large open economy. The government of Ouvert has just instituted a tax cut,increasing the deficit.tudy ToolsOn the graph, shift either the demand curve or the supply curve to illustrate the change in fiscal policy.nsress Tipscess TipsFOR YOUDomestic SavingStudyHuy ToolsSupplyDemandfor Principles ofSupply··.e FeedbackDemandO Type here to search341 PM89 F AQI 1077/25/2021 REAL INTEREST RATE10Homework (Ch 12)SupplyDemandУ ТoolsSupplyTipsTipsDemandOUpols1020304050QUANTITY OF LOANABLE FUNDSinciples ofThe increase in deficit causes the interest rate in Ouvert toAs an open economy, this change in interest rate causes the net capitalinflow to Ouvert to.This change in net capital inflow causes Ouvert's currency towhich in turn causes Ouvert's netexports toackThe change in net exports caused by the tax cutthe impact on aggregate demand of the expansionary fiscal policy,

Fiscal Policy refers to changes in government spending or taxation in order to regulate the economy.…

REAL INTEREST RATE Supply Demand Supply Demand 10 20 30 40 50 QUANTITY OF LOANABLE FUNDS The increase in deficit causes the interest rate in Ouvert to . As an open economy, this change in interest rate causes the net capital inflow to Ouvert to .This change in net capital inflow causes Ouvert's currency to which in turn causes Ouvert's net exports to The change in net exports caused by the tax cut the impact on aggregate demand of the expansionary fiscal policy.

REAL INTEREST RATE Supply Demand Supply Demand 10 20 30 40 50 QUANTITY OF LOANABLE FUNDS The increase in deficit causes the interest rate in Ouvert to . As an open economy, this change in interest rate causes the net capital inflow to Ouvert to .This change in net capital inflow causes Ouvert's currency to which in turn causes Ouvert's net exports to The change in net exports caused by the tax cut the impact on aggregate demand of the expansionary fiscal policy.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1) The government's budget deficit increases, and at the same time the trade deficit grows. This will lead to a(n) _____ in the demand and a(n) _____ in the supply of loanable funds in domestic markets. increase; increase decrease; increase decrease; decrease 2) A temporary decrease in government purchases would cause: a rightward shift in the saving curve and a leftward shift in the investment curve. a rightward shift in the saving curve and a rightward shift in the investment curve. no shift in the saving curve, but a leftward shift in the investment curve.
Crowding Out Effect for private borrowers may come due to the fact that Lenders prefer to lend money to commercial banks a. Lenders prefer to lend money to the US government Ob. Lenders prefer to lend money to the Federal Reserve C. Lenders prefer to lend money to foreign investors d.
Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 40 30 -20 6 35 35 -15 5 30 40 -10 4 25 45 -5 3 20 50 0 2 15 55 5 Given the information in the preceding table, 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. Because of the relationship between net capital outflow and net…