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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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 Spring '10
 Miko
 Microeconomics, Macroeconomics, Inflation, International Trade, Economics terminology, Comprehensive Comprehensive Problems

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