SHORT QUIZ1. How are you on the demand side

of the loanable funds market?2. How are you the supply side of

the loanable funds market?3. Calculate the real interest rate if

the CPI is 4% and the interest rate is 6%

4. How would your behavior change if the interest rate increased, but CPI stayed

constant?

More complex Japan, China, India

Exports $100B to India & Japan

Imports $50 B from India & Japan

Net Exports Current

Account Capital Account NCO?

Imports $75B to China & Japan

Exports $25B to China and Japan

Net Exports Current Account Capital Account NCO?

NCO = purchases of F. Assets by locals – purchases of domestic assets by foreigners

Exports $75B to India & China

Imports $75B from India & China

Net Exports Current

Account Capital Account NCO?

Exchange rate changes against $

Exchange rate changes against $

Loanable funds marketChange to r?

Faster than NX its: NCO

“Crowding Out effect”

What happens to the US $ if? US firms increase direct

investment in a poor country such as Guatemala?

Loanable funds in US S or D? What happens to NCO? How does that effect the US $

exchange rate in the Forex market?

Mankiw questions

Page 691 Problem #1,6, 8, 9, 10,11

Research a country Project Balance of payments Net importer/Exporter

(explanation of why) (oil) NCO Trading blocs 5 export goods 3 imported goods Exchange rate between US,

Euro, Yen Graph: 10 year history of

exchange rate between US Dollar

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