A country's domestic supply of saving, domestic demand for saving for purposes of capital formation, and supply of net capital inflowsare given by the following equations:S=1,200 +2,000r/= 2,000 - 4,000rKI=-100+ 6,000rInstructions: Enter real interest as percent values rounded to one decimal place. If you are entering any negative numbers, be sure toinclude a (-) in front of those numbers.a. Assuming that the market for saving and investment is in equilibrium, find the current values for national saving, capital inflows,domestic investment, and the real interest rate.Real interest: 7.5National Savings: 1350Capital inflows: 350Investment: 1700b. Assuming that desired national saving declines by 120 at each value of the real interest rate. Determine the effects of this reductionin domestic saving on the following values:Real interest: 8.5 %National Savings: 1250Capital inflows: 410Investment: 1660 c. Assume instead that concerns about the economy's macroeconomic policies cause capital inflows to fall sharply so that now KI =-640 + 6,000r. Determine the effects of this reduction in capital inflows on the following values:Real Interest:National Savings: 1700Capital inflows: 2100Investment: 15.20

The national savings rate is the GDP that is saved alternately spent in an economy. It is computed…

c. Assume instead that concerns about the economy's macroeconomic policies cause capital inflows to fall sharply so that now KI -640 + 6,000r. Determine the effects of this reduction in capital inflows on the following values: Real Interest: 2 % National Savings: 1700 Capital inflows: 2100 Investment 1520

c. Assume instead that concerns about the economy's macroeconomic policies cause capital inflows to fall sharply so that now KI -640 + 6,000r. Determine the effects of this reduction in capital inflows on the following values: Real Interest: 2 % National Savings: 1700 Capital inflows: 2100 Investment 1520

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.7P

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