1.) In a small open economy,
NS? = $20 billion + $160 billion * rw
Id = $15 billion – $200 billion *rw
Y=$60 billion
G= $10 billion
rw = .05
a) Find the country’s national saving, investment spending, current account balance desired consumption, and absorption.
b) Owing to a change, the country’s desired saving falls by $10 billion at each level of the world interest rate. Repeat part (a) with this information.
c) Start with the information as given in part (a), now let rw = 0.4, re-compute the values for the country’s national saving, investment spending, current account balance, desired consumption, and absorption.
