How did they come up with
4.5%?
How do you know if it's outflow or inflow?
4. This question is based on the following table which shows saving and investment schedules for each of two countries.
Real
Saving in Country A
Saving in Country B
Investment Investment in Country A in Country B
Interest Rate
2.5% 3.0% 3.5% 4.0% 4.5% 5.0%
330 360 390 420 450 480
730 760 790 820 850 880
760 720 680 640 600 560
860 820 780 740 700 660
Fill in the blanks and underline the correct word in parenthesis
Assuming there are no restrictions on the flow of funds between countries, the equilibrium world interest rate will be 4.5%. At that interest rate, Country A will have net capital (outflow, inflow) equal to 150.