Question: Using the saving and investment diagram for two large open economies, evaluate the impact on investment, saving, net foreign lending for the home and foreign

Using the saving and investment diagram for two large open economies, evaluate the impact on investment, saving, net foreign lending for the home and foreign economies when there is an increase in the marginal product of capital and therefore the desired capital stock in the home economy. Assume that the initial world real interest rate is such that it clears the goods market in both economies.

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