Consider a small open economy and suppose the global interest rate (r*) is 8%, the investment amount is governed by I(r) = 15M – 0.5r, and domestic savings are 12M. Sketch the supply and demand curve for S,I,r* and illustrate net exports or imports. Find the numeric value of net exports.

Consider a small open economy and suppose the global interest rate (r) is 8%, the investment amount is governed by I(r) = 15M – 0.5r, and domestic savings are 12M. Sketch the supply and demand curve for S,I,r and illustrate net exports or imports. Find the numeric value of net exports.

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: An Introduction To Basic Macroeconomic Markets

Section: Chapter Questions

Problem 13CQ

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Question

Consider a small open economy and suppose the
global interest rate (r*) is 8%, the investment amount
is governed by I(r) = 15M – 0.5r, and domestic
savings are 12M. Sketch the supply and demand
curve for S,I,r* and illustrate net exports or imports.
Find the numeric value of net exports.

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