Consider a small open economy with desired national saving of S^d = 200 + 10,000r^w and desired investment of I^d = 1000 - 5000r^w.If r^w = 0.05,then net exports equal A)100. B)50. C)-50. D)-100.

Question

Quizplus · Accepted Answer

Net exports (NX) can be calculated as NX = S - I, where S is national saving and I is investment.

S1U1P1dS1S1P0 = 200 + 10,000(0.05) = 700 
I1U1P1dS1S1P0 = 1000 - 5000(0.05) = 750

NX = S - I = 700 - 750 = -50

Therefore, the net exports equal -50, which means that the economy is a net importer. The correct choice is C.

Consider a Small Open Economy with Desired National Saving of Sd

Consider a Small Open Economy with Desired National Saving of S^d