Foreign exchange market regarding event

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Due to concerns about a rising level of debt relative to GDP, Congress and the President cut expenditures and raise taxes. (Refer to budget reform)

A. In the market for lonable funds which curve does this policy change shift? Which direction does it shift?

B . What does this policy change do to the equilibrium values of the interest rate and the quantity of loanable funds?

C. What does this policy change do to net capital outflow? Defend your answer.

D. This policy change causes net capital outflow to change. How is this change in net capital outflow shown in the market for foreign-currency exchange?

E. This policy change causes the exchange rate to change. What does the change in the exchange rate to do net export?

F. Please draw a graph of the loanable funds market, NCO, Foreign exchange market regarding this event.

Reference no: EM132153291

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