Consider a Small Open Economy with Desired National Saving of Sd

question 85

Essay

Consider a small open economy with desired national saving of Sd = 1000 + 1000rw and desired investment of Id = 1000 - 500rw.
Calculate national saving,investment,and the current account balance in equilibrium when the real world interest rate is
(a)rw = 0.025.
(b)rw = 0.05.
(c)rw = 0.0.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or service delivery, such as materials, labor, and utilities.

Internal Rate Of Return

A financial metric used to evaluate the profitability of investments, representing the interest rate at which the net present value of costs and benefits of a project break even.

Salvage Value

The anticipated salvage value of an asset at the termination of its service life.

Annual Cash Flows

The total amount of money being transferred into and out of a business, especially affecting liquidity, within a year.