Question: Consider the below demand and supply schedules for a loanable funds market. For all the below questions, assume this is a small open economy with

Consider the below demand and supply schedules for a loanable funds market. For all the below questions, assume this is a small open economy with perfect capital mobility.

a.Use the first three columns to draw the graph and indicate the equilibrium domestic interest rate and level of investment and savings. (For the moment you can ignore the last column.)

b.If the world interest rate is 3% and there is no risk premium, then what is the level of domestic savings, domestic investment, and the capital account?

c.Now consider the 4^thcolumn, showing the international supply of capital, which requires a risk premium for international borrowing above $100. How does this change the answer to question (3b) above?

d.Consider what would happen if the demand for loanable funds doubled. How would that change the level of domestic savings, domestic investment, the capital account, and the interest rate?

Consider the below demand and supply schedules for a loanable funds market.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

Gardial Fisheries is considering two mutually exclusive investments. The projects' expected net cash flows are as follows: a. If each project's cost of capital is 12%, which project should be...

3.Consider the below demand and supply schedules for a loanable funds market. For all the below questions, assume this is a small open economy with perfect capital mobility. Interest rate Domestic LF...

A. Read the case below and answer the following questions: 1. Across countries, why prices of stocks have fallen sharply? Explain how economic and financial uncertainty influence investors decisions...

Part one. Don't give incomplete work. WASHINGTONA top Fed official said Tuesday it is too early to tell whether the coronavirus outbreak will force the central bank to resume rate cuts in the coming...

Use the closed economy, supply and demand model of financial markets and its corresponding equations to anstrer part ( a ) . Use the small open economy model for net exports and net capital outflow...

please solve this and add the corresponding graphs to each part 4 . Use the closed economy, supply and demand model of financial markets and its corresponding equations to answer part ( a ) . Use the...

Use the closed economy, supply and demand model of financial markets and its corresponding equations to answer part ( a ) . Use the small open economy model for net exports and net capital outflow...

2. Real Exchange Rate. Consider a small country with perfect capital mobility and a oating exchange rate. Assume the country's currency is dollars. a. The real exchange rate 6 is just the relative...

Kindly solve the questions attached Question 2 (20 points} Chapters 4 & S Home is a small open economy with perfect capital mobility. Initially, it is in its long-run equilibrium and domestic and...

Part A. Production Problem 1. Consider the Cobb-Douglas production function f(x,y) = 12x0.4y0.8. (A) Find the intensities (? and 1 ? ?) of the two factors of production. Does this firm have...

answer all Makeover Inc. believes that at its current stock price of $16.00 the firm is undervalued in the market. Makeover plans to repurchase 2.4 million of its 20 million shares outstanding. The...

A certain plant requires SO2 solution in water which can be prepared by absorbing SO2 gas in pure water. The source of the SO2 is a sulfur burner which issues a gas consisting of 12 % SO2, 10% O2 and...

Identify each of the following variables as continuous or discrete. a. The length of time to run a marathon b. The number of people in line at a box office to purchase theater tickets c. The weight...

A ) e 2 - 2 e - 4 B ) e 2 + ( x , y ) = e x + e - y , x = t , y = t 3 . Find h ' ( 2 ) C E ) e 2 - 4 e - 2

This section deals with certain general background considerations and information related to the FASC and the answers can be found by clicking the "About the Codification" and "Notice to...

As the new staff person in your companys treasury department, you have been asked to conduct research related to a proposed transfer of receivables. Your supervisor wants the authoritative sources...

In 1933, the Swedish economist Gunnar Myrdal (who later won a Nobel prize in economics) and a group of his associates at Stockholm University collected a fantastically detailed historical series of...

When prices are (4, 6), Goldie chooses the bundle (6, 6), and when prices are (6, 3), she chooses the bundle (10, 0). (a) On the graph below, show Goldies first budget line in red ink and her second...

how to do the coding in visual studio exam_scores 86 90 O O OOO 93 75 86 66 nouwo 65 73 68 89 45 63 70 73 99 96 88 80 82 70 63 66 57 80 77 93 78 69 70 91 Jooooooooooooo NOOWN NOOPOOO WOJOWONO 000 99...

Self-confidence

The number of people commenting on the statement

3. Choose a social incident in your local area. (a) List three points that you believe are the cause of the social incident and develop a model that shows a linear relationship. (b) What is the...