Figure 13-1

-Refer to the FigurE13-1. If the world interest rate equals 4 percent, what is the net capital outflow?
A) -$4000
B) -$2000
C) $2000
D) $4000

Question

Figure 13-1
 
-Refer to the FigurE13-1. If the world interest rate equals 4 percent, what is the net capital outflow?
A) -$4000 
B) -$2000 
C) $2000 
D) $4000

Quizplus · Accepted Answer

At world interest rate of 4 percent, the equilibrium is where national saving (S) equals domestic investment (I) which is at the intersection of the saving curve (S) and investment curve (I). At this equilibrium, the net capital outflow (NCO) is negative $2000, which represents a capital outflow from the country to other countries. Therefore, the correct answer choice is B.

Figure 13-1 -Refer to the FigurE13-1. If the World Interest Rate Equals