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3. Investment in a small open economy. Consider a small country that takes the world interest rate as exogenous. Firms in this country can borrow

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3. Investment in a small open economy. Consider a small country that takes the world interest rate as exogenous. Firms in this country can borrow on global bond markets. Explain why a decrease in the interest rate that prevails in global credit markets may induce an investment boom and a subsequent output boom in this economy. (max ten lines). (15 points)

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