Suppose that a country with a closed economy has private saving of $5 trillion and a government

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Suppose that a country with a closed economy has private saving of $5 trillion and a government budget deficit of $3 trillion.
a. What is the equilibrium level of investment?
b. If the economy is open and has net capital inflow of $6 trillion, what is the level of investment?
c. Explain how an open economy can allow a country to run a budget deficit and still have a high level of investment.
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Macroeconomics

ISBN: 9780132109994

1st Edition

Authors: Glenn Hubbard, Anthony Patrick O'Brien, Matthew P Rafferty

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