5. How would each of the following affect national saving, investment, the current account balance, and the

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5. How would each of the following affect national saving, investment, the current account balance, and the real interest rate in a large open economy?

a. An increase in the domestic willingness to save (which raises desired national saving at any given real interest rate).

b. An increase in the willingness of foreigners to save.

c. A temporary increase in foreign government purchases.

d. An increase in foreign taxes (consider both the case in which Ricardian equivalence holds and the case in which it doesn’t hold).

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Macroeconomics

ISBN: 9780134896441

10th Edition

Authors: Andrew Abel, Ben Bernanke, Dean Croushore

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