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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