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Assume the world is made of two large open economies, economy 1 and economy 2. Economy 1's desired saving function is Sd 1= 200 +
Assume the world is made of two large open economies, economy 1 and economy 2. Economy 1's desired saving function isSd1= 200 + 800rand their desired investment function isId1= 400 - 3,200r. Economy 2's desired saving function isSd2= 500 + 1,000rand their desired investment function isId2= 750 - 2,750r. In these equations,ris the real interest rate (in decimal form). Calculate the equilibrium world interest raterw.
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