Note: The answer should be typed. Please reply quickly. On the following graph, plot the relationship between the real interest rate and net capital outflow by using the green points (triangle symbol) to plotthe points from the initial data table. Then use the black point (X symbol) to indicate the level of net capital outflow at the equilibrium realinterestrate you derived in the previous graph.REALINTEREST RATENet Capital Outflow10-15 -10 -50 5 10 15NET CAPITAL OUTFLOW (Billions of dollars)8-20 -16 -10Market for Foreign-Currency ExchangeBecause of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate impliesthat the economy is experiencingNow, suppose the government is experiencing a budget deficit. This means thatloanable funds.Effects of a Budget Deficit1020After the budget deficit occurs, suppose the new equilibrium real interest rate is 6%. The following graph shows the demand curve in the foreign-currency exchange market.810QUANTITY OF DOLLARS (Billons)Use the green line (triangle symbol) to show the supply curve in this market before the budget deficit. Then use the purple line (diamond symbol) toshow the supply curve after the budget deficit.DemandA15NCO+Eqm. NCO20Summarize the effects of a budget deficit by filling in the following table.?AInitial Supplywhich leads toSupply with DeficitReal Interest Rate Real Exchange Rate Trade Balance Suppose 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)765REALINTEREST RATE432National Saving(Billions of dollars)454035302520Domestic Investment(Billions of dollars)303540Market for Loanable Funds455055Given 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.Net Capital Outflow(Billions of dollars)-15-10-50Demand-0-Supply510Equilibrium

In the information about the loanable funds market, the National Savings (S) is considered as the…

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 REALINTEREST RATE 6 4 National Saving (Dillions of dollars) 45 40 35 20 25 20 Domestic Investment (Dillions of dollars) 20 35 40 45 50 55 Market for Loanable Funds Net Capital Outflow (Dillions of dollars) -15 -10 -5 0 Given the information in the table above, use the blue points (circle symbol) to plot the demand for leanable 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. Demand 5 10 Supply + Equilibrum

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 REALINTEREST RATE 6 4 National Saving (Dillions of dollars) 45 40 35 20 25 20 Domestic Investment (Dillions of dollars) 20 35 40 45 50 55 Market for Loanable Funds Net Capital Outflow (Dillions of dollars) -15 -10 -5 0 Given the information in the table above, use the blue points (circle symbol) to plot the demand for leanable 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. Demand 5 10 Supply + Equilibrum

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

Note: The answer should be typed.

Please reply quickly.

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 realinterest
rate you derived in the previous graph.
REALINTEREST RATE
Net Capital Outflow
10
-15 -10 -50 5 10 15
NET CAPITAL OUTFLOW (Billions of dollars)
8
-20 -16 -10
Market for Foreign-Currency Exchange
Because of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate implies
that the economy is experiencing
Now, suppose the government is experiencing a budget deficit. This means that
loanable funds.
Effects of a Budget Deficit
10
20
After the budget deficit occurs, suppose the new equilibrium real interest rate is 6%. The following graph shows the demand curve in the foreign-
currency exchange market.
8
10
QUANTITY OF DOLLARS (Billons)
Use the green line (triangle symbol) to show the supply curve in this market before the budget deficit. Then use the purple line (diamond symbol) to
show the supply curve after the budget deficit.
Demand
A
15
NCO
+
Eqm. NCO
20
Summarize the effects of a budget deficit by filling in the following table.
?
A
Initial Supply
which leads to
Supply with Deficit
Real Interest Rate Real Exchange Rate Trade Balance

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
REALINTEREST RATE
4
3
2
National Saving
(Billions of dollars)
45
40
35
30
25
20
Domestic Investment
(Billions of dollars)
30
35
40
Market for Loanable Funds
45
50
55
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.
Net Capital Outflow
(Billions of dollars)
-15
-10
-5
0
Demand
-0-
Supply
5
10
Equilibrium

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