In the market clearing model with world markets for goods and credit, an increase in technology, A, in the home country causes:

Question

Quizplus · Accepted Answer

An increase in technology increases the marginal product of capital (MPK) which in turn increases investment in the home country. This does not necessarily lead to a decrease in home country gross domestic investment or an increase in lending to foreigners.

In the Market Clearing Model with World Markets for Goods