Final answer:
Capital and equity decrease when a withdrawal is made. Economic shifts affect demand and supply for financial capital, influencing savings and investments which in turn affect equity.
Step-by-step explanation:
When you make a withdrawal, capital goes down and when money goes down, equity goes down as well. This correlation can be observed in various economic climates, such as during periods of technological innovation or economic recessions.
For instance, during the technology boom of the late 1990s, companies were eager to invest in new technology, which led to an increase in the demand for financial capital. Similarly, government budget surpluses and increases in trade deficits impact the supply and demand for financial capital. If investment in physical capital remained constant, a reduction in private savings would be necessary, which, in turn, would affect equity levels. Conversely, if private savings remained the same, then investment would need to increase, again affecting equity levels.