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The diagram to the right shows equilibrium in the goods market of a small open economy at point A. Assume that this small open 18-
The diagram to the right shows equilibrium in the goods market of a small open economy at point A. Assume that this small open 18- S 0 economy is under capital controls, meaning domestic residents are prohibited from borrowing and lending from the world capital market. 16- 1.) Using the line drawing tool, show the world real interest rate 14- below the closed-economy domestic rate. Properly label this line. 12- 2.) Using the point drawing tool, identify the amount of desired Real interest rate, r 10-0 A saving at this world real interest rate. Label this point 'B'. 8- 3.) Using the point drawing tool, identify the amount of investment at this world real interest rate. Label this point 'C'. 6- Carefully follow the instructions above, and only draw the required 4- 0 objects. 2- This situation is one with Desired national saving & investment
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