If desired saving increases in a small open economy, net exports (net capital outflow) rise. What happens to net exports if desired saving rises in most of the world's economies at the same time?
What will be an ideal response?
An increase in global saving reduces the world real interest rate, which lowers saving and raises investment in all open economies. This counteracts the initial increase in saving. In some economies, where the initial increase in saving is relatively small, the effect of the reduced interest rate will dominate, so that net exports (net capital outflow) will decline.
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If the farm adopted a new technology, which allows it to use fewer resources to fatten chickens, explain how the farm's production possibilities will change. Explain how the opportunity cost of producing a bushel of soybean will be affected
What will be an ideal response?