Consider a world with only two countries, which are designated the home country (H) and the foreign country (F). Output equals its full-employment level in each country. You are given the following information about each country:

Home Country

Consumption: C_Home = 100 + 0.5Y_H - 500 r^w

Investment: I_Home = 300 - 500 r^w

Government Purchases: G_Home = 155

Full-employment Output: Y _Home = 1000

Foreign Country

Consumption: C_For = 225 + 0.7 Y_For - 600 r^w

Investment: I_For = 250 - 200 r^w

Government Purchases: G_For = 190

Full-employment Output: Y_For = 1200

a.Write national saving in the home country and in the foreign country as functions of the

world real interest rate r^w

b.What is the equilibrium value of the world real interest rate?