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Hello, please help me with this (all the graphs and the drop arrows), I continue to get them incorrect. 3. Effects of a government budget
Hello, please help me with this (all the graphs and the drop arrows), I continue to get them incorrect.
3. Effects of a government budget deficit 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. 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 real interest Real Interest Rate National Saving Domestic Investment Net Capital Outflow rate you derived in the previous graph. (Percent) (Billions of dollars) ( Billions of dollars) (Billions of dollars) 55 30 -15 (?) 6 50 40 -10 45 50 -5 Net Capital Outflow 40 60 W L 35 70 2 30 80 10 NCO .+ Choices for the drop arrow lines are as follows: Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points Eqm. NCO Drop#1: balanced trade, or a trade deficit, or a trade surplus (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. REAL INTEREST RATE Drop#2: national saving will increase, or national saving will decrease, or domestic investment will increase (? or domestic investment will decrease. Drop#3: an increase in the supply of, or a decrease in the supply of, or an increase in the demand for, Market for Loanable Funds N or a decrease in the demand for. 10 -20 -15 -10 5 10 15 20 Demand NET CAPITAL OUTFLOW (Billions of dollars) 0 Supply 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 REAL INTEREST RATE .4 Equilibrium Now, suppose the government is experiencing a budget deficit. This means that , which leads to loanable funds. N 0 20 40 60 80 100 QUANTITY OF LOANABLE FUNDSStep by Step Solution
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