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Unformatted text preview: (b) Suppose now that G rise to 1,250. Solve for national saving, investment, the trade balance, and the equilibrium exchange rate. Explain what you find. (c) Now suppose that the r* rise from 5% to 10%. G = 1,000. Solve for national saving, investment, the trade balance, and the equilibrium exchange rate. Explain what you find. • Suppose that some foreign countries begin to subsidize investment by instituting an investment tax credit. (a) What happens to world interest rate? (b) What happen to investment in our small open economy? (c) What happens to our trade balance? (d) What happens to our real exchange rate? A n y q ue s t i o , p l e a f r c m 8 9 136 3 2 6 4 L _ g @ h...
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This note was uploaded on 10/13/2010 for the course ECON Mi22 taught by Professor Miko during the Spring '10 term at UC Riverside.
- Spring '10