A large open economy has desired national saving of Sd = 1200 + 1000rw, and desired...

A large open economy has desired national saving of Sd = 1200 + 1000rw, and desired national investment of Id = 1000 - 500rw. The foreign economy has desired national saving of = 1300 + 1000rw, and desired national investment of = 1800 - 500rw. The equilibrium world real interest rate equals

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Rahul Sunny answered 2 years ago

6. In a small open economy, desired national saving, S d = $10 billion + ($100...

6. In a small open economy, desired national saving, S d = $10 billion + ($100 billion)rw ; desired investment, Id =$15 billion-($100 billion)rw ; output, Y= $50 billion; government purchases, G = $10billion; world real interest rate, rw =0.03 a. Find the economy’s national saving, investment, current account surplus, net exports, desire consumption, and adsorption. b. Owing to a technological innovation that increases future productivity, the country’s desired investment rises by $2 billon at each level of the world...

Write the equation for national saving for a small open economy. If national saving is held...

Write the equation for national saving for a small open economy. If national saving is held constant, what happens to domestic investment if NCO decreases? Why? Suppose the nominal exchange rate is 100 yen per dollar. Further, suppose the price of a baseball glove in Canada is $50 and the price of a baseball glove in Japan is 7500 yen. What is the real exchange rate between Japan and Canada in terms of baseball gloves? Is there a profit opportunity...

In a large open economy ________. the effect of shifts in saving and investment on net...

In a large open economy ________. the effect of shifts in saving and investment on net capital flows are in the same direction as in a closed economy the effect of shifts in saving and investment on the domestic real interest rate and the actual levels of saving and investment are in the same direction as in a closed economy the effect of shifts in saving and investment on the trade balance are in the same direction as in a...

Suppose that, for a given year, national saving in a country (an open economy) equals 200,...

Suppose that, for a given year, national saving in a country (an open economy) equals 200, private consumption in final goods and services equals 100, and government consumption in final goods and services equals 20. In addition, firms invested 75 in final goods and services and spent 25 in intermediate goods. Households invested 50 in the domestic stock market. What is the level of output in this country in this year? And what is the balance of the current account?...

What is saving in open economy? Discuss what are differences of saving in closed and open...

What is saving in open economy? Discuss what are differences of saving in closed and open economy?

In a small open economy, Sd = 1,000 + 10,000r Id= 2,000 – 10,000r where Sd...

In a small open economy, Sd = 1,000 + 10,000r Id= 2,000 – 10,000r where Sd is the desired saving, Id is the desired investment, and r is the real interest rate (in decimal form). If the world interest rate is rw = 5% (i.e., 0.05 in decimal form), what is the current account balance CA? Give the number.

Consider a large open economy in equilibrium between home saving and home investment. What are the...

Consider a large open economy in equilibrium between home saving and home investment. What are the effects 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? Justify your answer with economic intuition and/or graphical analysis; **What not to anwer with: stating what happens to each variable is not sufficient to earn credit for this question. (1)...

Assume that in a small open economy where full employment always prevails, national saving is 250....

Assume that in a small open economy where full employment always prevails, national saving is 250. a. If domestic investment is given by I = 650 – 22 r, where r is the real interest rate, what would the equilibrium "r" be if the economy were closed? b. If the economy is open and the world interest rate is 11 percent, what will investment be? c. Using your answer from part b., what is the current account surplus/deficit ?...

According to the Classical small open economy model, what happens to domestic national saving, investment, the...

According to the Classical small open economy model, what happens to domestic national saving, investment, the trade balance, and the real exchange rate in response to each of the following events? Draw a loanable funds market diagram and a net exports diagram to illustrate your answer in each case. (For these diagrams, let’s assume that the country starts out running a current account surplus and capital account deficit, as in the examples in class.) (a) The introduction of a stylish...

A closed economy has full employment output of 6000. Government purchases, G, are 1200. Desired consumption...

A closed economy has full employment output of 6000. Government purchases, G, are 1200. Desired consumption and desired investment are: Cd= 3600 - 2000r + 0.10Y, and Id = 1200 - 4000r where Y is output and r is the real interest rate. a. Find an equation relating desired national saving, Sd, to r and Y. b. Using the goods market equilibrium condition, find the real interest rate that clears the goods market. Assume the output equals full-employment output. c....

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