Suppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between differen real interest rates and this economy's levels of national saving, domestic investment, and net capital outflow. Assume that the economy is current operating under a balanced government budget. Real Interest Rate (Percent) 7 6 4425 3 National Saving (Billions of dollars) 45 40 35 30 25 20 Domestic Investment (Billions of dollars) 20 30 Market for Loanable Funds 40 50 60 70 Net Capital Outflow (Billions of dollars) -15 -10 -5 0 5 10 Given the information in the table above, 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. (?)

Suppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between differen real interest rates and this economy's levels of national saving, domestic investment, and net capital outflow. Assume that the economy is current operating under a balanced government budget. Real Interest Rate (Percent) 7 6 4425 3 National Saving (Billions of dollars) 45 40 35 30 25 20 Domestic Investment (Billions of dollars) 20 30 Market for Loanable Funds 40 50 60 70 Net Capital Outflow (Billions of dollars) -15 -10 -5 0 5 10 Given the information in the table above, 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. (?)

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

REAL INTEREST RATE
10
8
0
0
20
Market for Loanable Funds
60
40
QUANTITY OF LOANABLE FUNDS
80
100
Demand
Supply
Equilibrium
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.

Suppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between different
real interest rates and this economy's levels of national saving, domestic investment, and net capital outflow. Assume that the economy is currently
operating under a balanced government budget.
Real Interest Rate
(Percent)
7
6
5
4
3
Сл
2
National Saving
(Billions of dollars)
45
40
35
30
25
20
Domestic Investment
(Billions of dollars)
20
30
40
50
60
70
Market for Loanable Funds
Net Capital Outflow
(Billions of dollars)
-15
-10
-5
0
5
10
Given the information in the table above, 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.
(?)

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Indicate the Quantity demanded and Quantity supplied of loanable funds if the Interest rates increases by 2% (from the equilibrium rate). would changed in interest rate cause a movement along the curve or shift? Interest rate 24% 22 20 ' 18 16 14 12 10 a 6 4 2 Y S ° $200 $400 600 D 800 1,000 1,200 Quantity of leanable funds (billions of dollars) Indicate the Quantity demanded and Quantity supplied of loanable funds if the Interest rates increases by 2% (from the equilibrium rate). would changed in interest rate cause a movement along the curve or shift?
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1
] In the loanable funds market model, assuming everything else is constant, which curve (supply of funds or demand for funds) is affected if there is an increase in national saving? How will equilibrium real interest rate and equilibrium quantity of loans change?