1. Consider two large open economies (Country 1 and Country 2) with the following information:

Country 1

Sd = 7 + 80 r

Id = 25 - 70 r

Country 2

Sd = 12 + 90 r

Id = 15 - 60 r

What is the interest rate in the world equilibrium? What is balance of the Current Account in Country 1?

A.r = 0.07; CA in Country 1 = 7.5

B.r = 0.07; CA in Country 1 = -7.5

C.r = 0.09; CA in Country 1 = -4.5

D.r = 0.09; CA in Country 1 = 4.5