1. The country of Albanystan (country A) forms a small open economy on its own. It has savings SA=30+300r  and investment IA=80-200r.
    1. If r=0.2, is country A a borrower or a lender?
    2. Below what interest rate would country A be a borrower?

The country of Bostonland (country B) decides to join and together they form a large open economy with SB=40+100r and IB=5-500r

  1. What is the equilibrium interest rate?
  2. What is CAA, CAB?
  3. Which country borrows and which country lend?

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

  1. What is the new equilibrium interest rate?
  2. Is country A a borrower or a lender?

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