Question

Suppose that America decides to increase their savings. If the elasticity of US net capital outflow with respect to the real interest rate is very high will this increase in private saving have a large or small affect on US domestic investment? If the elasticity of US exports with respect to the real exchange rate is very low will this increase in private saving have a large or small affect on the US real exchange rate

Answer 1

1. If Americans choose to rise their savings, this might lead to a decrease within the actual rate of interest and therefore the USA net investment expenditure can rise.
2. If the elasticity of America net investment discharge with regard to the actual rate of interest is incredibly low, this rise privately saving can have an oversized impact on U.S. national speculation. This can be as a result of since the physical property is low, currently there won't be abundant of wealth expenditure and therefore maximum of it will be used for native speculation.
3. If the elasticity of America trades with regard to the actual rate of exchange is incredibly high, this growth privately saving can have a little impact on the U.S. actual rate of exchange.