Assume that in a small open economy in the long run where full employment always prevails, national saving is 500. The domestic investment is given by I = 400-8r, where r is the real interest rate in percent.

a.What would the equilibrium interest rate be if the economy were closed? Blank____ %

Now consider the case where the economy is open and the world interest rate is 12 percent.

b.What will investment be? Blank 2_____(1 d.p.)

c.What will the current account be in surplus or deficit? Blank 3____ (a one word answer is required)

d. What will net capital outflow(NCO) be? Blank _____(1 d.p.)