Consider an open economy for Openland described by the following equations (all figures in millions of dollars):

Y = C + I + G + NX

Y = 8,000 (current value of output)

G = 2,000

T = 1,000 + .1(Y)

C = 450 + 0.75 (Y - T)

I = 2,000 - 40 r

NX = 700- 600 ( is the exchange rate)

r = r* = 5 (real rate of interest)

a) What is the current state of this economy in term of national saving, investment, the trade balance and the equilibrium exchange rate?

c)Now suppose that the world interest rate rises from 5 to 10 percent (G is again 2,000). Would the change in interest have the same impact on National saving and investment? Does it impact the exchange rate? Explain