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Using the goods market and assuming that the economy is a small open economy, graphically illustrate and state in words what happens to the economy's
Using the goods market and assuming that the economy is a small open economy, graphically illustrate and state in words what happens to the economy's equilibrium real interest rate and equilibrium (desired) investment, saving, and net exports, when the business sector becomes more optimistic about future profitable opportunities. Assume the world interest rate is below the domestic real interest rate (the rate that would prevail if the economy were closed). Make sure you properly label all the axes and curves.
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