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Effects of a government budget deficit Suppose a hypothetical open economy uses the U . S . dollar as currency. The table below presents data
Effects of a government budget deficit
Suppose a hypothetical open economy uses the US 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.
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.
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.
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 symbol to indicate the level of net capital outflow at the equilibrium real interest
rate you derived in the previous graph.
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