Consider a small open economy with desired national saving of Sd = 20 + 200rw and desired investment of Id = 30 - 200rw. Calculate national saving, investment, and the current account balance in equilibrium when the real world interest rate is
(a) rw = 0.025.
(b) rw = 0.05.
(c) rw = 0.0.
(d) Now suppose something causes desired national saving to increase by 10, so that it is now Sd = 30 + 200rw. Repeat parts (a), (b), and (c).
(e) Suppose, with desired national saving at its original level of Sd = 20 + 200rw, something causes desired investment to rise by 10, to Id = 40 - 200rw. Repeat parts (a), (b), and (c).
(a) S = 25, I = 25, CA = 0.
(b) S = 30, I = 20, CA = 10.
(c) S = 20, I = 30, CA = -10.
(d) rw = 0.025: S = 35, I = 25, CA = 10.
rw = 0.050: S = 40, I = 20, CA = 20.
rw = 0.000: S = 30, I = 30, CA = 0.
(e) rw = 0.025: S = 25, I = 35, CA = -10.
rw = 0.050: S = 30, I = 30, CA = 0.
rw = 0.000: S = 20, I = 40, CA = -20.
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