Savings and Investment in the Global Two-Countr

Consider a world composed of two countries that are initially identical. The Home and Foreign production functions are
Y= AF(K) and Y* = A *F(K*)
a) Using a graphical analysis, show the qualitative response of the Home and Foreign current accounts and the world interest rate to an anticipated increase in the value of A(A* is unchanged). Explain the intuition for your answer.
b) Suppose rather that there is an anticipated global productivity boom, with the values of A and A* increasing by the same amounts. Again, using a graphical analysis, show the qualitative responses of Home and Foreign current accounts and the world interest rate in this case. Explain the intuition for your answer.
c) c) In contrast to being anticipated in the future, let’s now assume that a Home productivity rise is observed today (no change in Foreign’s productivity). Examine the responses in Home and Foreign current accounts and the world interest rate (use graphs).
d) Imagine that Home is now more impatient, represented by a higher rate of time preference & (no change in Foreign’s impatience). Examine the responses in Home and Foreign current accounts and the world interest rate (use graphs).
e) Using a graphical analysis, first explain the impact of an outward shift in the foreign country’s saving schedule (that is, it wants to save more at any given interest rate). Next, explain the impact of an inward shift in the foreign country’s investment schedule (that is, it wants to invest less at any given interest rate). Which scenario better captures the impact of emerging Asia on the world economy since the late 1990s? Discuss.
IMPORTANT: Late submissions will NOT be accepted. Answers should be
typed. Please use Times New Roman, font size 12, and 1.5 spacing.
plz use the equation editor

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