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In a small open economy, output is $25 billion, government purchases are $6 billion, taxes are $5 billion. Consumption function is C = 2 + 0.6(Y – T). Investment is related to the world real interest rate in the following manner: World Real Interest Investment Rate 5% $3 billion 4% $4 billion 3% $5 billion 2% $6 billion a. How much is consumption? b. How much is national saving? c. For each value of the world real interest rate, find net capital outflow.

In a small open economy, output is $25 billion, government purchases are $6 billion, taxes are $5 billion. Consumption function is C = 2 + 0.6(Y – T). Investment is related to the world real interest rate in the following manner: World Real Interest Investment Rate 5% $3 billion 4% $4 billion 3% $5 billion 2% $6 billion a. How much is consumption? b. How much is national saving? c. For each value of the world real interest rate, find net capital outflow.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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In a small open economy, output is $25 billion, government purchases are $6 billion, taxes are $5 billion. Consumption function is C = 2 + 0.6(Y – T). Investment is related to the world real interest rate in the following manner: World Real Interest Rate Investment 5% $3 billion 4% $4 billion 3% $5 billion 2% $6 billion a. How much is consumption? b. How much is national saving? c. For each value of the world real interest rate, find net capital outflow.
Transcribed Image Text:In a small open economy, output is $25 billion, government purchases are $6 billion, taxes are $5 billion. Consumption function is C = 2 + 0.6(Y – T). Investment is related to the world real interest rate in the following manner: World Real Interest Rate Investment 5% $3 billion 4% $4 billion 3% $5 billion 2% $6 billion a. How much is consumption? b. How much is national saving? c. For each value of the world real interest rate, find net capital outflow.
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