2. Consider a world consisting of two large economies: Russia and the rest of the world....

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2. Consider a world consisting of two large economies: Russia and the rest of the world. Assume that initially Russia is running a current account surplus. (a) Illustrate this case using well-labeled saving and investment graphs. (b) Assume sanctions imposed by the rest of the world on Russia force it to become a closed economy with no international trade. Explain what must happen to the real interest rate, national saving, investment, and the current account balance in each economy. 2. Consider a world consisting of two large economies: Russia and the rest of the world. Assume that initially Russia is running a current account surplus. (a) Illustrate this case using well-labeled saving and investment graphs. (b) Assume sanctions imposed by the rest of the world on Russia force it to become a closed economy with no international trade. Explain what must happen to the real interest rate, national saving, investment, and the current account balance in each economy.

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Heres an analysis of the scenario including labeled graphs and explanations a Initial Situation Russ... View the full answer