Unformatted text preview: ower interest rates at home will cause a depreciation of the country's currency. This will decrease imports and increase exports. X/Y will increase. The Net Exports Share and the Real Interest Rate The Nongovernment Share of GDP
Nongovernment share of GDP (NG): the sum of the GDP shares of consumption, investment, and net exports at any level of interest rate. NG C I X = + + Y Y Y Y Summing Up Consumption, Investment, and Net Exports Shares G/Y and NG/Y
Government's share of GDP:
NG G = 1- Y Y G NG = 1- Y Y Because government spending is not affected by fluctuations in the real interest rate, G/Y will be illustrated as a vertical line. Finding the Share Available for Nongovernment Use Determining the Equilibrium Interest...
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