Explain how a decrease in the level of taxes

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Assume that Indonesia is a small open economy. Explain how a decrease in the level of taxes (T ∗ ) in the rest of the world affects the world interest rate, the Indonesian interest rate, level of investment, net exports and net capital outflows in Indonesia. Support your answer with a graph of the rest of the world loanable funds market and a graph of the Indonesian loanable funds market.

Reference no: EM13975068

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