Consider a small open economy with desired national saving of Sd = 1000 + 1000rw and desired investment of Id = 1000 - 500rw.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.
What will be an ideal response?
| (a) | S = 1025, I = 987.5, CA =37.5. |
| (b) | S = 1050, I = 975, CA = 75. |
| (c) | S = 1000, I = 1000, CA = 0. |
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