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41. (Module 41) Consider the loanable funds market in the nations of Maxitonia and Elistan. The interest rate is 5% in Maxistan and it is
41. (Module 41) Consider the loanable funds market in the nations of Maxitonia and Elistan. The interest rate is 5% in Maxistan and it is 3% in Elistan. Further, citizens in each country view investments in the other nation to be the same risk as investments in their own nation. a. Draw correctly labeled side-by-side graphs to show the loanable funds market in cach nation. In the absence of international capital flows, label the equilibrium interest rate in each nation. b. If capital is allowed to flow between nations, which country will see an inflow of funds? Explain. c. In each graph, show the international equilibrium interest rate and the size of the capital inflows and capital outflows. (9 points)
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