What happens to the real interest rate and the ca balance

Reference no: EM13241825

Consider a two-country model. Assume that the Current Account Balance is initially positive for one country. Assume that a permanent positive shock to production affects the country which initially had a positive current account balance. Assume that the shift increases the MPK. Graphically, indicating the effect on the commodity market clearing. Be clear to indicate what happens to the real interest rate and the CA balance.

Reference no: EM13241825

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