3. Effects of a government budget deficitSuppose 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 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.REAL INTEREST RATE108200Market for Loanable Funds204060QUANTITY OF LOANABLE FUNDS80100DemandSupply+Equilibrium? 3. Effects of a government budget deficitSuppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between differentreal interest rates and this economy's levels of national saving, domestic investment, and net capital outflow. Assume that the economy is currentlyoperating under a balanced government budget.Real Interest Rate(Percent)765432National Saving(Billions of dollars)403530252015Domestic Investment(Billions of dollars)303540455055Net Capital Outflow(Billions of dollars)-20-15-10-505

Public reserve funds of the economy It is a savings account or highly liquid assets placed aside to…

Answered: Suppose a hypothetical open economy…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Effects of a government budget deficit

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

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.
REAL INTEREST RATE
10
8
2
0
0
Market for Loanable Funds
20
40
60
QUANTITY OF LOANABLE FUNDS
80
100
Demand
Supply
+
Equilibrium
?

3. Effects of a government budget deficit
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
2
National Saving
(Billions of dollars)
40
35
30
25
20
15
Domestic Investment
(Billions of dollars)
30
35
40
45
50
55
Net Capital Outflow
(Billions of dollars)
-20
-15
-10
-5
0
5

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