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2. A country has national saving of $60 million, government expenditures of $30 million, domestic investment...

2. A country has national saving of $60 million, government expenditures of $30 million, domestic investment of $40 million, and net capital outflow of $20 million. What is its supply of loanable funds? Show your work.

. 3. In the open-economy macroeconomic model, the supply of loanable funds equals_______________. The demand for loanable funds comes from ________________ + _________________.

4. If there is a surplus of loanable funds, the quantity demanded is ___________(more/less) than the quantity supplied and the interest rate will _________(rise/fall).

An increase in the budget deficit causes net capital outflow to ________(rise/fall).  

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Answer #1

2. A country has national saving of $60 million, government expenditures of $30 million, domestic investment of $40 million, and net capital outflow of $20 million. What is its supply of loanable funds?

            Supply of loanable funds = domestic investment + net capital outflow

            therefore Supply of loanable funds = $40 +$20 = $60 million

3. In the open-economy macroeconomic model, the supply of loanable funds equals National savings. The demand for loanable funds comes from domestic investment + net capital outflow

4. If there is a surplus of loanable funds, the quantity demanded is less than the quantity supplied and the interest rate will fall

An increase in the budget deficit causes net capital outflow to Fall, because the supply of loanable funds shifts left

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