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. Real Interest Rate (Percent) 7 6 5 4 3 2 National Saving (Billions of dollars) 60 55 50 45 40 35 Domestic Investment (Billions of dollars) 30 40 50 60 70 80 Net Capital Outflow (Billions of dollars) -10 -5 0 5 10 15 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.
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. Real Interest Rate (Percent) 7 6 5 4 3 2 National Saving (Billions of dollars) 60 55 50 45 40 35 Domestic Investment (Billions of dollars) 30 40 50 60 70 80 Net Capital Outflow (Billions of dollars) -10 -5 0 5 10 15 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.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter31: The Impacts Of Government Borrowing
Section: Chapter Questions
Problem 3SCQ: In the late 1990s, the U.S. government moved from a budget deficit to a budget surplus and the trade...
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