14 . problems and applications q9 suppose that americans decide to increase their saving. as a result, the real interest rate will , and u.s. net capital outflow will . if the elasticity of u.s. net capital outflow with respect to the real interest rate is very low, this increase in private saving will have a effect on

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19-12-2022
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14 . problems and applications q9 suppose that americans decide to increase their saving. as a result, the real interest rate will , and u.s. net capital outflow will . if the elasticity of u.s. net capital outflow with respect to the real interest rate is very low, this increase in private saving will have a effect on

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sapanpandit sapanpandit · Answer 1 · 2022-12-22T05:33:01-05:00

The text explains that when Americans chose to save more, interest rates will decrease and net capital outflows would increase. Real exchange rates are going down.

The text explains that when Americans chose to save more, interest rates will decrease and net capital outflows would increase. This rise in private saving will have little impact on domestic investment if the elasticity of net capital outflow in the United States with regard to interest rates is very high. The net capital outflow will significantly rise with these low interest rates, while domestic investment won't alter much.

Our research above reveals that in this case, net capital outflow will rise. This suggests that real exchange rates will decrease. This rise in private saving will consequently have little impact on the real exchange rate in the United States if the elasticity of exports with respect to real exchange rate is very low.

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