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

question 78

Essay

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

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