CENGAGE MINDTAP Q Search this course Module Seven Quiz X On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the long-run effects of the decrease in the money supply. 6 3 INFLATION RATE (Percent) N 2 3 5 UNEMPLOYMENT RATE (Percent) In the long run, the decrease in the money supply results in an increase in the inflation rate and an increase in the unemployment rate (relative to the economy's initial equilibrium).Module Seven Quiz 3. Effects of a government budget decit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) { Billions of dollars) { Billions of dollars) ( Billions of dollars) 7 45 25 -10 6 4a 30 -5 5 35 35 D 4 30 4D 5 3 25 45 10 2 20 50 15 :CENGAGE \\ MINDTAP - 9 I Module Seven Quiz Given the information in the preceding table, use the blue paints (circle symbol) to plot the demand for Iaanable Fund's. Next, use the orange points { square symbol) to plot the supply of loanable funds. Finally, use the black paint (cross symbol) to indicate the equilibrium in this market. Marks! for Loanabla Funds 1- Demand -I- s _ Supply - + . 4 - Equilibrium REAL INTEREST RATE D 4IIlll 0 20 40 60 BO 1 DD QUANTITY OF LDANABLE FUNDS Module Seven Quiz 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. Market for Foreign-Currency Exchange 10 8 Initial Supply 6 Supply with Deficit REAL EXCHANGE RATE 2 Demand 20 -15 -10 -5 0 5 10 15 20 QUANTITY OF DOLLARS (Billions) Summarize the effects of a budget deficit by filling in the following table. Real Interest Rate Real Exchange Rate Trade Balance Effects of a Budget Deficit