Consider an open economy scenario.

Explain how the small open economy's GDP and GNP are affected in each of the following scenarios: (5x2 = 10 marks)

i.Domestic country's rate of depreciation increases.

ii.Domestic country experiences a rise in productivity (A).

iii.A rise in the world interest rate

iv.A rise in capital's share of income ()

v.A rise in the risk premium in a scenario where the domestic rate of interest is different from world rate of interest in presence of uncertainty.