Relationships in net capital outflow and world interest rate

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1. The market for loanable funds in country 1 is described by the equations I = 18 - 6r and S = 8+4r; in country 2, it is I = 18 - 4r and S = 8 + 2r.

a) Find the relationships between net capital outflow and the world interest rate r w in the two countries.

b) What is the nature of these relationships? (Are they both positive, both negative, or one positive and the other negative?)

Reference no: EM131195438

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