The country of Cincinnatisland (country C) joins country B to form a large open economy, while country A forms a small open economy on its own with Sc = 50 + 200r and Ic = 25 – 400r f. What is the new equilibrium interest rate? g. Is country A a borrower or a lender?

The country of Cincinnatisland (country C) joins country B to form a large open economy, while country A forms a small open economy on its own with Sc = 50 + 200r and Ic = 25 – 400r f. What is the new equilibrium interest rate? g. Is country A a borrower or a lender?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter4: The Aggregate Economy

Section: Chapter Questions

Problem 5E

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Question

Solve Question 2( f and g ONLY )

The country of Cincinnatisland (country C) joins country B to form a large open economy,
while country A forms a small open economy on its own with Sc = 50 + 200r and
Ic = 25 – 400r
f. What is the new equilibrium interest rate?
g. Is country A a borrower or a lender?

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