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Germany's Bundestag approved a special defense fund worth 100bn ($110bn) to modernize its army, an initiative prompted by Russia's invasion of Ukraine (the Economist, 4

Germany's Bundestag approved a special defense fund worth 100bn ($110bn) to modernize its army, an initiative prompted by Russia's invasion of Ukraine" (the Economist, 4 June 2022). Use the goods & services market to predict the effects of this fiscal shock on interest rates, saving, investment, and net exports for Germany and the rest of the world in the following three cases: (a) Germany is closed; (b) Germany is a small open economy; (c) Germany is a large open economy.

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