Assume that in a small open economy where full employment always prevails, national saving is 500. If domestic investment is given by I = 600 - 40r, where r is the real interest rate in percent. If the economy is open and the world interest rate is 1 percent, what will investment be?

Assume that in a small open economy where full employment always prevails, national saving is 500. If domestic investment is given by I = 600 - 40r, where r is the real interest rate in percent. If the economy is open and the world interest rate is 1 percent, what will investment be?

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Open-Economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 3QCMC

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Question

Assume that in a small open economy where full employment always prevails,
national saving is 500. If domestic investment is given by I = 600 - 40r, where r is
the real interest rate in percent.
If the economy is open and the world interest rate is 1 percent, what will
investment be?

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