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Let the investment and saving curves be I=80-2r and S=6r (r measured in percentage).
a) Assume the economy is closed, calculate the equilibrium levels of the interest rate, savings, investment and current account.
b) How would your answers to a) change if the country is a small open economy and the international interest rate is 8%and 12%? Give the new solutions for interest rate, saving, investment, and the current account, and obtain a function for the current account in terms of interest rate.
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