Shocks on the equilibrium quantity of savings

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Reference no: EM131089587

Use a graph to analyze the effects of the following shocks on the equilibrium quantity of savings, investment, the interest rate, and the current account in a small open economy. Assume that the economy begins with a balanced current account. Label everything in your graphs. Explain why any curve shifts.

a) There is an increase in the expected future marginal productivity of capital.

b) A recession today reduces income today. Expected future income is unchanged.

Reference no: EM131089587

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