Macroeconomics

As the United States economy moves out of a recession, U.S. financial investors increase their purchases of stocks that are expected to earn a higher rate of return than they are currently earning on their savings account deposits.

1. Using a correctly labeled loanable funds graph, show the impact of the financial investors’ actions on real interest rates.
2. Explain how the change in interest rates you identified in part (A) will impact the following:
3. the international value of the dollar
4. net exports of the United States (based on the changing value of the dollar)
5. Explain how the change in net exports will impact U.S. aggregate demand in the short-run.
6. Explain how the change in U.S. aggregate demand will impact unemployment in the short-run.