Assume prices are flexible, factors of production are fully employed in both countries and there is perfect capital mobility in the small open economy. Compare the impact of an increase in investment demand in: 1- Small open economy. 2- large open economy.
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Assume prices are flexible, factors of production are fully employed in both countries and there is perfect capital mobility in the small open economy. Compare the impact of an increase in investment
1- Small open economy.
2- large open economy.
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- Compare the impact of an increase in investment demand in a small open economy and a large open economy. Assume prices are flexible, factors of production are fully employed in both countries and there is perfect capital mobility in the small open economy.Consider a small open economy that takes the world real interest rate as given. Suppose the world real interest rate is less than the country’s autarky real interest rate. Which of the following is TRUE? a. Domestic saving exceeds domestic investment b. There is capital outflow c. There is excess demand for capital d. None of the other optionsDraw a diagram for Saving and Investment in a small open economy.Assume the world real interest rate is above the closed equilibrium interestrate for the country you drew. Is this country a foreign lender or foreignborrower? Explain with the intuition of the saving and investment functions
- Which of the following statements is true for the small open economy? a.Saving is not always equal to investment b.Saving is always greater than investment c.Saving is always equal to investment d.Saving is always less than investment Clear my choiceIn a small open economy, if domestic investment equals $70 billion, domestic private saving equals $40 billion, and government saving equals $30 billion, then the trade balance is: a. -$30 billion b. $0 billion c. $30 billion d. $40 billionIn an open economy, national saving equalsdomestic investmenta. plus the government’s budget deficit.b. minus the net exports of goods and services.c. plus the net outflow of capital.d. minus foreign portfolio investment
- Which of the following statements does not belong to the main benefits of foreign direct investment (FDI)? FDI creates new jobs and boosts government tax revenues. FDI creates positive knowledge spillovers. FDI brings competition and improves efficiency. FDI makes local firms more difficult to survive and thus destroys local jobs.Discuss the role of budget surpluses and trade surpluses in national saving and investmentThe open-economy macroeconomic model includesa. only the market for loanable funds.b. only the market for foreign-currency exchange.c. both the market for loanable funds and the market for foreign-currency exchange.d. neither the market for loanable funds or the market for foreign-currency exchange.
- In the open-economy macroeconomic model, the key determinant of net capital outflow is the A. real interest rate. When the real interest rate rises, net capital outflow rises. B. real interest rate. When the real interest rate rises, net capital outflow falls. C. real exchange rate. When the real exchange rate rises, net capital outflow rises. D. real exchange rate. When the real exchange rate rises, net capital outflow falls.In an open economy the national income identity shows that: Where S stands for national savings, I for investment spending and NX for the trade balance. Carefully state this identity in words and explain why it is expected to hold.Suppose that GDP is equal to 1,000, national saving is equal to 200, the current account deficit is equal to 100, and the government budget deficit is equal to 50. Private savings must equal （ ）