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, A, typically leads to higher productivity, which can increase the marginal product of capital (MPK) and domestic investment. However, if the home country invests more than it saves, it may need to borrow from foreigners to finance the additional investment.

In the Market Clearing Model with World Markets for Goods