Assume That in a Small Open Economy with Full Employment $$\text { he }$$

question 35

Essay

Assume that in a small open economy with full employment, consumption depends only on disposable income. National saving is 300, investment is given by I = 400 - 20r, where r is the real interest rate in percent, and the world interest rate is 10 percent.
a. he
If government spending rises by 100, does investm ent change? What is the level of investment after t
$$\text { he }$$ change?
b. Does the trade balance change if G rises by 100? If it changes, does it increase or decrease, and by how much?
c. Does net capital outflow change if G rises by 100? If it changes, does it increase or decrease, and by how much?
d. Will the real exchange rate rise, fall, or remain constant as a result of the change in G?

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Definitions:

Job Satisfaction

The level of contentment individuals feel with their job, including aspects like work environment, responsibilities, and compensation.

Generation X

The demographic cohort following the baby boomers, typically defined as individuals born between the early 1960s and early 1980s.

Work/Life Balance

The equilibrium achieved when an individual equally prioritizes the demands of one's career and the demands of one's personal life.

Globalization

The method through which companies or various groups gain international impact or begin functioning globally.