Consider a Small Open Economy with Desired National Saving of Sᵈ

question 10

Essay

Consider a small open economy with desired national saving of Sᵈ = 20 + 200 rʷ and desired investment of Iᵈ = 30 - 200 rʷ.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 $S d = 30 + 200 r ^w$ Repeat parts a,b,and c.
e.Suppose,with desired national saving at its original level of Sᵈ = 20 + 200 rʷ,something causes desired investment to rise by 10,Iᵈ = 40 - 200 rʷ.Repeat parts a,b,and c.

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Definitions:

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