The nation of Hamsterville is currently in long-run equilibrium.However, for some reason, saving rates have beendecreasing.

a. Show the effect of the decrease in savings rates on interestrates in a correctly labeled graph of the market for loanablefunds.

b. What will happen to investment spending in the short run inHamsterville as a result of the change in interest rates?Explain.

c. What effect will this change in interest rates have onoutput, inflation, and unemployment in the short-run?

d. What effect will the change in the interest rate and thechange in investment spending you described in part (b) have onpotential output in the long run? Explain.

e. What effect will the change in interest rates have onHamsterville's exchange rates and net exports? Explain.

Answer rating: 100% (QA)

Answer e Lower interest rates also increase net exports through the effects of lower interest rates ... View the full answer