A country's domestic supply of saving, domestic demand for saving for purposes of capital formation, and supply of net capital inflows are given by the following equations:

S = 1,800 + 2,000r

I = 2,000 4,000r

KI = -100 + 6,000r

Instructions:Enterreal interestas percent valuesrounded to one decimal place. If you are entering any negative numbers, be sure to include a () in front of those numbers.

a. Assuming that the market for saving and investment is in equilibrium, find the current values fornational saving, capital inflows, domestic investment, and the real interest rate.

Real interest: %

National Savings:

Capital inflows:

Investment:

b. Assuming that desired national saving declines by 120 at each value of the real interest rate. Determine the effects of this reduction in domestic saving on the following values:

Real interest: %

National Savings:

Capital inflows:

Investment:

c. Assume instead that concerns about the economy's macroeconomic policies cause capital inflows to fall sharply so that now KI = 700+6,000r. Determine the effects of this reduction in capital inflows on the following values:

Real interest: %

National Savings:

Capital inflows:

Investment: