This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: interest rate. A Large Open Economy A large open economy can affect the world real interest rate. The world real interest rate equates desired international lending by the U.S., for example, with desired international borrowing by the rest of the world. Equilibrium occurs when the amount the U.S. wants to lend abroad is equal to the amount foreigners wish to borrow from us. A rise in investment in the U.S. raises the world real interest rate; an increase in saving in the U.S. lowers the world real interest rate....
View Full Document
- Fall '09
- Personal Finance