A large open economy has desired national saving of Sd = 1200 + 1000rw, and desired national investment of Id = 1000 - 500rw. The foreign economy has desired national saving of 
= 1000 + 1000rw, and desired national investment of 
= 1800 - 500rw. Calculate the equilibrium values of rw, CA, CAFor, S, I, SFor, and IFor.
What will be an ideal response?
In equilibrium, Sd + 
= Id + 
so that 2200 + 2000rw = 2800 - 1000rw, or 3000rw = 600, so rw = 0.2. Using this in the formulas, we get S = 1400, I = 900, CA = 500, SFor = 1200, IFor = 1700, and CAFor = -500.
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