Home Homework (Ch 19) show the supply curve after the budget deflot. Q Search the og and Study Tools mer Offers Maret for Foreign Currency Exchange al Options ege Success Tips Spy -er Success Tips NDED FOR YOU Supply with Defit REAL EXCHANGE RATE ROWN Gracial De True Exercises: Arms and Demand -15 10 20 10 5 1 QUANTITY OF DOLLARS Feedback Summarize the effects of a budget detot by Milong in the following table Real Interest Rate Real Exchange Rate Trade Balance Effects of a Budget Dericht MacBook 3. Effects of a government budget deficit Consider 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. doilar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate (Percent) National Saving (Billions of dollars) 40 Domestic Investment (Billions of dollars) 30 Net Capital Outflow (Bilions of dollars) -20 35 -15 35 40 30 -10 -5 45 SO 0 20 15 55 and Given the information in the preceding table, use the blue points (oindle symbol) to pilot the demand for foanable runds. Next, use the chalige points Coquare symbol) to ploe the supply of loanable Runds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market Maret for Loanable Funds o Demand ch Given the information in the preceding table, use the blue points (cirde symbol) to plet the demand for loanable funds. Next, or the orange points (square symbol) to plot the supply of loanable unds. Finally, use the black point (cross symbol) to indicate the equitum in the market. Market for Loanable Funds Demand --- Supply REAL INTEREST RATE Equilibrium 20 50 QUANTITY OF LOANABLE PUNDS On the following graph plot the relationship between the real interest rate and net capital otrow by using the green ponts (tragem) te plot the points from the initial date table than one the black point x symbol) to indicate the level of net capital outflow at the names rate you derived in the previous graph 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 rate you derived in the previous graph. Net Capital Outflow A NGO Eom. NCO REAL INTEREST RATE 20 -10 15 NET CAPITAL OUTFLOW Brons of dollars) Because of the welationship between net capital outflow and net exports, the level of net capital outflow at the real interest rate more that the economy is experiencing MBORD 20 Tools -10 15 NET CAPITAL OUTFLOW (Bilions of dollars) Because of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate imples that the economy is experiencing Tips Tips Now, suppose the government is experiencing a budget deficit. This means that which leads to Joonable funds After the budget deficit occurs, suppose the new egun belum real interest rate in 7%. The following graph shows the demand curve in the foreign currency exchange market ou Use the green line (triangle symbol) to show the supply curve in this market before the budget deficit. Then use the purple tine (ciemand symbor) show the supply curve after the budget deficit. Arms and Market for Foreign Currency Exchange Soy Sucely with Date ALEXCHANGE RATE MacBook
