Consider a Small Open Economy with Desired National Saving of S^d

question 41

Essay

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

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Definitions:

Expected Monetary Values

A financial analysis method used to anticipate the potential financial results by assessing the varied possible outcomes and the likelihood of each occurring, considering their impact on overall financial performance.

Expected Value

The anticipated value of a variable, computed as an average of all possible values weighted by their probabilities.

Expected Monetary Value

A calculation used in decision-making to determine the average outcome when the future includes scenarios that may or may not happen.

Analytic Decision Making

The process of making choices by systematically analyzing information, evaluating alternatives, and basing decisions on rational evidence.