The following graphs depict the market for loanable funds and the relationship between the real interest rate and the level of net capital outflow (NCO) measured in terms of the Mexican currency, the peso Homework 9Mind Tap - Cengage LearningMy Solutions | bartlebyThe following graphs depict the ×ECON 2 ch 32 Flashcards | Qui xng.cengage.com/static/nb/ui/evo/index.html?deploymentld=56736722285465063859354651818&elSBN=9781337096607&id=956323372&snapshotld=2022307&KKolby v«CENGAGE MINDTAPQ Search this courseA My HomeHomework (Ch 19)Courses(?Catalog and Study ToolsА-ZThe Market for Loanable Funds in MexicoMexican Net Capital OutflowPartner Offers9.Rental Options8SupplyCollege Success Tips77Career Success TipsRECOMMENDED FOR YOU4NCODemand3bongo21110121+++Making Time to Problem-0 1 21278-4-3-2-1346LOANABLE FUNDS (Billions of pesos)NET CAPITAL OUTFLOW (Billions of pesos)SolveHelpGive FeedbackComplete the first row of the table to reflect the state of the markets in Mexico.Real Interest RateNet Capital Outflow (NCO)(Percent)(Billions of pesos)Initial stateAfter capital flightREAL INTEREST RATE (Percent)REAL INTEREST RATE (Percent)LO...

In the market of loanable fund diagram, the equilibrium rate of interest and quantity of loanable fund is determined where the demand and supply curve of funds intersects. In the first given figure of the market of the loanable funds in Mexico, the real rate of interest at the equilibrium is 5% and funds are 4 billions of pesos. Now, at initial state, when the real rate of interest in 5%, the net capital Outflow will be 1 billion according to the graph. Capital flight refers to withdrawal of assets and capital in a large number from one nation. Capital flight can occur due to various reasons like political or economic instability, capital controls imposed by government or devaluation of the nation's currency. Since there is net capital outflow of 1 billion Pesos from Mexican market, the supply declines by 1 billions Pesos at real interest rate of 5%. Hence, after capital flight, supply curve shifts backward by 1 billion Pesos. Therefore, the equilibrium interest rate in domestic market will increase as shown in the following diagram: Therefore, after capital flight Real Interest Rate is 5.5%, and Capital Outflow is 0.5 billion pesos.So, the table is as follows: Real Interest Rate (Percent) Net Capital Outflow (NCO) (Billions of Pesos) Initial State 5 1 After Capital Flight 5.5 0.5

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The Market for Loanable Funds in Mexico Mexican Net Capital Outflow Supply 6. NCO Demand 0 1 2 3 4 5 4 3 2 1 •1 2 3 4 5 6 LOANABLE FUNDS (Billions of pesos) NET CAPITAL OUTFLOoW (Billions of pesos) Complete the first row of the table to reflect the state of the markets in Mexico. Real Interest Rate Net Capital Outflow (NCO) (Percent) (Billions of pesos) Initial state After capital flight REAL INTEREST RATE (Percent) REAL INTEREST RATE (Percent)

The Market for Loanable Funds in Mexico Mexican Net Capital Outflow Supply 6. NCO Demand 0 1 2 3 4 5 4 3 2 1 •1 2 3 4 5 6 LOANABLE FUNDS (Billions of pesos) NET CAPITAL OUTFLOoW (Billions of pesos) Complete the first row of the table to reflect the state of the markets in Mexico. Real Interest Rate Net Capital Outflow (NCO) (Percent) (Billions of pesos) Initial state After capital flight REAL INTEREST RATE (Percent) REAL INTEREST RATE (Percent)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The graphs below depict the loanable funds market and the relationship between real interest rates and the level of net capital outflow (NCO) calculated in terms of the Mexican peso. REAL INTEREST RATE (Percent) 8 8 10 3 1 The Market for Loanable Funds in Mexico + 0 1 2 3 4 Supply Demand 5 6 LOANABLE FUNDS (Billions of pesos) Initial state After capital flight 7 8 (?) REAL INTEREST RATE (Percent) Complete the first row of the table to reflect the state of the markets in Mexico. Real Interest Rate Net Capital Outflow (NCO) (Percent) (Billions of pesos) Mexican Net Capital Outflow 8 7 6 10 5 4 3 2 NÇO + # -3 -2 -1 0 1 2 3 4 5 NET CAPITAL OUTFLOW (Billions of pesos) 6 (?) Suppose now that a sudden bout of political turmoil in Mexico causes world financial markets to become uneasy. Because investors now see Mexico as unstable, they decide to pull a portion of their assets out of Mexico and put them into more stable economies. This unexpected shock to the demand for assets in Mexico is…
In 1997/1998 the Indonesian economy was severely hit by the economic crisis, which was then followed by the fall of the New-Order regime. This event brought about political instability and the weakening of a number of macroeconomic indicators. The phenomenon of capital flight began when investors decided to pull some of their valuable assets out of Indonesia and move them to "safer" countries. Provide your analysis on the implications of this crisis to the market for loanable funds, net capital outflow, and the exchange rate in Indonesia.
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