market both before and after the increase in foreign savings? c. How does the change in foreign savings affect both investment and future output in the United states?
market both before and after the increase in foreign savings? c. How does the change in foreign savings affect both investment and future output in the United states?
Chapter21: Financial Markets, Saving, And Investment
Section: Chapter Questions
Problem 5P
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Question
Recently, the economies of China and India have begun to grow very rapidly.
This increases their citizens’ income and wealth. In turn, these citizens
increase their savings in their country and also in the United States.
a. When foreign savings enter the U.s. loanable funds market, which
curve is affected—supply or demand? How is this curve affected?
b. How would you graph the U.s. loanable funds market both before and
after the increase in foreign savings?
c. How does the change in foreign savings affect both investment and
future output in the United states?
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