Imagine your country is a small open economy. Show the effects of a saving boom versus...
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Imagine your country is a small open economy. Show the effects of a saving boom versus the effects of a domestic investment boom in the equilibrium interest rates and exchange rate of your country. Also show the effect on the current account and on net capital outflows. Provide graphical and economic explanations. a) (10 points) Effect on the equilibrium interest rate. b) (10 points) Effect on the equilibrium exchange rate. c) (10 points) Effect on the current account. Imagine your country is a small open economy. Show the effects of a saving boom versus the effects of a domestic investment boom in the equilibrium interest rates and exchange rate of your country. Also show the effect on the current account and on net capital outflows. Provide graphical and economic explanations. a) (10 points) Effect on the equilibrium interest rate. b) (10 points) Effect on the equilibrium exchange rate. c) (10 points) Effect on the current account.
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a Saving boom Increase in domestic savings Shift right of domestic saving curve S Increase in demand ... View the full answer
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