4. The text showed, for a small open economy, that an increase in the government budget deficit raises the current account deficit only if it affects desired national saving in the home country. Show that this result is also true for a large open economy. Then assume that an increase in the government budget deficit does affect desired national saving in the home country. What effects will the increased budget deficit have on the foreign country's current account, investment in both countries, and the world real interest rate? 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).