How are the identities S = NCO + I and NCO = NX related to the foreign currency exchange market and the loanable funds market?
S is national saving, which is the source of supply in the loanable funds market. NCO + I is net capital outflow plus domestic investment, which is the source of demand in the loanable funds market. NCO is the source of supply in the foreign-currency exchange market. NX is net exports, which is the source of demand in the foreign-currency exchange market.
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