Consider a Large Open Economy

question 44

Essay

Consider a large open economy.What are the effects,in equilibrium,on the world real interest rate,domestic national saving,domestic investment,the domestic current account balance,foreign national saving,foreign investment,and the foreign current account balance in each of the following scenarios? Show a diagram to illustrate your results.
(a)current income rises in the foreign country
(b)the future marginal product of capital rises in the domestic country
(c)wealth rises in the foreign country

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Definitions:

Uvula

A small fleshy extension at the back of the soft palate that hangs above the throat, playing roles in speech and preventing food from entering the nasal cavity.

Septum

A structure within the brain that acts as a partition between two cavities or spaces, important in both emotion and motivation.

Olfactory Membrane

A specialized epithelial tissue inside the nasal cavity involved in smell detection.

Activation-synthesis Hypothesis

A theory suggesting that dreams are the result of the brain's attempt to make sense of neural activity that occurs during sleep.