Question
Consider a two-period economy with investment. The optimal investment at t = 1 is characterized by the following optimality condition: A2f'(k2) = r + .
Consider a two-period economy with investment. The optimal investment at t = 1 is characterized by the following optimality condition: A2f'(k2) = r + .
Imagine the economy receives favorable news about future productivity A2 in period t = 2. How would it affect investment, consumption, current account and equilibrium interest rate in period t = 1, if the economy is: (a) a small open economy? (b) a closed economy? (c) a large open economy?
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Managing in a Global Economy Demystifying International Macroeconomics
Authors: John E. Marthinsen
2nd edition
128505542X, 978-1305176157, 1305176154, 978-1285055428
