Question

Use two correctly labeled side-by-side graphs of the loanable funds market in the United States and China to show how a higher interest rate in the United States will lead to capital flows between the two countries. On your graphs, be sure to label the equilibrium interest rate in each country in the absence of international cap- ital flows, the international equilibrium interest rate, and the size of the capital inflows and outflows.

Answer 1

Answer:

Figure is given below.

Explanation:

The graph of United states and china is as follows :

Answer 2

Equilibrium is a condition in which market demand and supply or market forces are balanced, resulting in steady prices. Demand and supply balance each other out, resulting in a condition of equilibrium.

The international interest rate of equilibrium is set at 4%. The chart also shows capital inflows and outflows, as well as the United States and China's off-balance interest rates.

The image is attached below to show the equilibrium graphs.

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