i keep having trouble with these questions, i'm not quite sure i just understand it
G ng.cengage.com Content Mind Tap - Cengage Learning Homework Help - Q&A from On CENGAGE | MINDTAP Q Sea Homework (Ch 19) 2 -20 -15 -10 - 5 0 5 10 15 20 NET CAPITAL OUTFLOW (Billions 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 implies that the economy is experiencing Now, suppose the government is experiencing a budget deficit. This means that , which leads to loanable funds. After the budget deficit occurs, suppose the new equilibrium real interest rate is 7%. The following graph shows the demand curve in the foreign- currency exchange market. 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 A Initial Supply 8 Supply with Deficit ANGE RATE 6 MacBook Air DD A 80 688 F10 F3 F4 F5 F6 F7 $ % 9 5 8 3 R T Y U O P EUNIVERSITY G A ng.cengage.com Content Mind Tap - Cengage Learning Homework Help - Q&A fro CENGAGE | MINDTAP Homework (Ch 19) Supply REAL INTEREST RAT Equilibrium 2 20 60 80 100 QUANTITY OF LOANABLE FUNDS 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. ? ses Net Capital Outflow A NCO B Eqm. NCO REAL INTEREST RATE MacBook Air DD DD E6 E7 F10 F4 3 6 8 9 O W D E R T Y U OG ng.cengage.com C Content MindTap - Cengage Learning Homework Help - Q&A from Onl CENGAGE | MINDTAP Q se Homework (Ch 19) 2. 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. coccoce Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) Billions of dollars) (Billions of dollars) (Billions of dollars) 50 30 -20 6 45 40 -15 40 50 -10 A UT 35 60 - 5 w 30 70 0 2 25 80 UT 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 (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. Market for Loanable Funds 10 O Demand RATE Supply MacBook Air DD FB F10 FA F6 F7 E9 E2 % 9 O 3 5 6 8 Y U O D W E R T KG ng.cengage.com C Content Mind Tap - Cengage Learning Homework Help - Q&A fro CENGAGE | MINDTAP Homework (Ch 19) Market for Foreign-Currency Exchange 10 A Initial Supply Supply with Deficit REAL EXCHANGE RATE Demand -20 -15 -10 - 5 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 Grade It Now Save & Continue Continue without saving MacBook Air DII DD F6 F10 F3 F4 % 5 6 8 9 O D E R T Y U O
