Consider the following model of a small, open economy:

• =4000
• =+++
• =
• =400+0.8()
• =8005000
• =800400
• =300
• =1000

1. Assuming that theworld's real interest rate is 8% (rw* = .08), what will national saving (S) and investment (I) be for this economy?
2. What are the equilibrium values of net exports (NX) and the real exchange rate ()?
3. What are the equilibrium values of net exports and the real exchange rate if the world's real
4. interest falls to 6%, all else equal?
5. What are the equilibrium values of net exports and the real exchange rate if the world's real
6. interest rate is 8%, but domestic government purchases (G) are reduced to 100, all else equal?