Question

7) Considering a closed economy, a small open economy, and a large open economy. In which economy is the

effect of an increase in MPK greatest on the level of investment in the economy. Show the change in level

of investment graphically for these three economies.

Answer 1

7.

In close economy the stream of salary and speculation is just amongst family units and business firms. It implies MPK will be most minimal and level of venture will likewise be least. In Small open economy the stream of wage and speculation is between family units, firms, money related markets and governments. Consequently, the development of helps is higher and MPK will be higher with higher rate of venture. In substantial open economy the stream of wage and venture is between families, firms, monetary markets, government and outside nations. There is more inflow of capitals that expands more speculations and MPK turns into the most astounding.