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Unformatted text preview: Quantity of Dollars Quantity of Loanable Funds Net Foreign Investment Real Exchange Rate r 1 1 E 1 Supply Supply Demand Demand Figure 30-4 T HE R EAL E QUILIBRIUM IN AN O PEN E CONOMY . In panel (a), the supply and demand for loanable funds determine the real interest rate. In panel (b), the interest rate determines net foreign investment, which provides the supply of dollars in the market for foreign-currency exchange. In panel (c), the supply and demand for dollars in the market for foreign-currency exchange determine the real exchange rate....
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.
- Spring '10