Suppose that Northlandia and Southlandia are the only two trading countries in the world, that each nation
Question:
Suppose that Northlandia and Southlandia are the only two trading countries in the world, that each nation runs a balance of payments on both current and financial accounts equal to zero, and that each nation sees the others assets as identical to its own. Using the accompanying diagrams, explain how the demand and supply of loanable funds, the interest rate, and the balance of payments on current and financial accounts will change in each country if international capital flows are possible.
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Since the interest rate is 10 in Northlandia and 6 in Southlandia demanders of loanable funds in Nor...View the full answer
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