2. In a small open economy, output (gross domestic product) is $25 billion, government purchases are $6

Question:

2. In a small open economy, output (gross domestic product) is $25 billion, government purchases are $6 billion, and net factor payments from abroad are zero. Desired consumption and desired investment are related to the world real interest rate in the following manner: World Real Desired Desired Interest Rate Consumption Investment 5°/o $12 billion $3 billion 4°/o $13 billion $4 billion 3°/o $14 billion $5 billion 2°/o $15 billion $6 billion For each value of the world real interest rate, find national saving, foreign lending, and absorption. Calculate net exports as the difference between output and absorption. What is the relationship between net exports and foreign lending?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Macroeconomics Value Edition

ISBN: 978-0136114895

7th Edition

Authors: Andrew B. Abel ,Ben Bernanke ,Dean Croushore

Question Posted: