National saving and investment

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A change in any part of the national saving and investment identity suggests that if the government budget deficit changes, then either private savings, private investment in physical capital, or the trade balance (or some combination of the three) must change as well. Answer the following question set based on the National Savings in the US decreasing.

- Would the real interest rate in the US increase or decrease? Explain.

- Would demand for the US dollar increase or decrease, if the real interest rates around the world remained constant? Explain.

- Based on your prediction from the previous bullet point, what would happen to the value of the US dollar in the world marketplace? Explain.

- Based on your predictions in the previous bullet point, what should the US do regarding US imports? Exports? Trade status? Explain.

Reference no: EM133359371

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