How will equilibrium amount of savings and investment

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Reference no: EM131171757

Jamaica is a small open economy that has a trade surplus. Use savings/investment diagrams to answer the following:

a) Suppose the Government of Jamaica decides to raise taxes. How will the equilibrium amount of savings, investment, and trade balance be affected?

b) Suppose that scenario a) above never happened. Consider instead the case where the US, a large open economy and Jamaica's largest trading partner, had passed a tax increase. How would Jamaica's equilibrium savings, investment, and trade balance be affected? Use one S-I diagram for the US, and another one for Jamaica. How is Jamaica's currency affected? Please explain

Reference no: EM131171757

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