Chapter 13

Question 1

Market for loanable funds (what is it?)

Answer 1

Interaction between savers supplying funds and borrowers demanding funds

Question 2

Market for loanable funds (equation)

Answer 2

S = I + NCO

Question 3

Market for foreign currency exchange (what is it?)

Answer 3

exists because people want to trade goods, services, and financial assets with people in other countries, but want to be paid in their own currency

Question 4

Market for foreign currency exchange (equation)

Answer 4

Same as the other ? (S - I = NCO)

Question 5

capital flight

Answer 5

large and sudden reduction in demand for assets located in country

Question 6

risk premium

Answer 6

The additional return investors require for taking on higher levels of risk in their investment