ECON 1B03 Chapter Notes - Chapter 13: Mexican Peso, Capital Flight, Loanable Funds

54 views3 pages
Shanghaibalcony1234 and 37744 others unlocked
ECON 1B03 Full Course Notes
46
ECON 1B03 Full Course Notes
Verified Note
46 documents

Document Summary

Supply and demand for loanable funds and for foreign currency exchange. If the amount of national savings exceeds the amount needed to finance the purchase of domestic capital, the amount left over can be used to finance the purchase of an asset abroad then nco is positive. If national savings is insufficient to finance the purchase of domestic capital, the shortfall can be met by the savings of foreigners then nco is negative. A higher real interest rate encourages people to save and therefore raises the quantity of loanable funds made available by national savings. But makes borrowing to finance capital projects more costly, which in turn discourages investment and reduces the quantity of loanable funds demanded. Demand curve slopes downward because a higher interest rate decreases the quantity of loanable funds demanded. Supply curve slopes upward because a higher interest rate increases the quantity of loanable funds supplied.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

Related Questions