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1. Temporary Shocks, Small and Large Open Economies During the Great Financial Crisis, most developed economies decreased interest rates and kept them low for a
1. Temporary Shocks, Small and Large Open Economies During the Great Financial Crisis, most developed economies decreased interest rates and kept them low for a long time. Illustrate the effects of a drop in interest rates by developed economies on the emerging market economy's saving and investment graph, assuming that emerging market economy is a small, open economy that before the crisis was running a CA deficit. Problem 2. Temporary Shocks in Large Open Economies a) Illustrate the effects of a temporary adverse shock that decreases saving in the rest of the world on the saving and investment graph for the U.S., assuming that U.S. is a large, open economy that before the shock was running a CA deficit. b) What are the effects of this shock on the real interest rate, savings, investment, and current account in the U.S
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