Question

Consider a world with on two coun nes, which are designated the home country H and the F) You are g ven the reign country ollowing information about each country Saving and nvestment ere an S 10 bil on and s n % Home Country Foreign Count Sy 2.5 + 0.5 SF = 1.0 + 1.0 Investment a-80-10 -65-0.5 a. What is the equilibrium value of the world real interest rate and the current account balance in each country? b. Suppose the foreign country's desired saving rises by 3.0 at each level of the world real interest rate. What is the new equilibrium world interest rate and the current account balance in each country?

Answer 1

ca.) ー 4.333 E Y 333 сан D 4.674.7

Cb.) 2dd: 1.ro. 6 5-0.5 xw-l-4xw α, 5 to5xw-&t l.yo= 1.83 6. 167 3.4)6- CAH-a75 18.33 ) -5-58