In a Small Open Economy,describe What Happens When an Increase

question 109

Essay

In a small open economy,describe what happens when an increase in wealth causes national saving to decline.Explain the impact on the real interest rate,saving,investment,net exports,and absorption in equilibrium.

---

Definitions:

Consumer Price Index

An index that measures the change over time in the price level of a basket of consumer goods and services.

Monetary Policy

Measures undertaken by a government's central bank to control the money supply and influence economic conditions.

Supply of Money

The sum of financial resources present within an economy at a certain point in time.