Faradia is a closed economy who’s national saving (NS) and investment (I) are given by the following equations:

where r is the real interest rate.
Suppose the government of Faradia increases the budget surplus by 5. Which of the following effects will occur?

Question

Faradia  is a closed economy who’s national saving (NS) and investment (I) are given by the following equations: 
 
    
 where  r  is the real interest rate. 
 Suppose the government of  Faradia  increases the budget surplus by 5. Which of the following effects will occur?

Answer

Increase in national saving, fall in investment.

Answer

Increase in investment, fall in the real interest rate.

Answer

Decrease in national saving, rise in real interest rate.

Answer

Increase in investment, rise in the real interest rate.

Answer

Decrease in national saving, rise in investment.

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Faradia is a closed economy who’s national saving (NS) and investment (I) are g...

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