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.
(a) S = 1025, I = 987.5, CA =37.5.
(b) S = 1050, I = 975, CA = 75.
(c) S = 1000, I = 1000, CA = 0.
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Which of the following statements is correct?
A) Open market purchases are expansionary and open market sales are contractionary. B) Open market purchases are contractionary and open market sales are expansionary. C) Both open market purchases and open market sales are expansionary. D) Both open market purchases and open market sales are contractionary.
Pepsi and pizza are normal goods. When the price of pizza rises, the substitution effect causes Pepsi to be relatively
a. more expensive, so the consumer buys more Pepsi. b. more expensive, so the consumer buys less Pepsi. c. less expensive, so the consumer buys more Pepsi. d. less expensive, so the consumer buys less Pepsi.