Assume that Lalaland is a small open economy. Explain how an increase in consumer confidence in the
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Question:
Assume that Lalaland is a small open economy. Explain how an increase in consumer confidence in the rest of the world (i.e., an increase in autonomous consumption) affects the world interest rate and the Lalaland interest rate, level of investment, net exports and net capital outflows. Support your answer with a graph of the rest of the world loanable funds market and a graph of the loanable funds market of Lalaland.
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