The national accounting of country M is reported as follows:
Y (GDP) = 100 (in billions)
C (consumption) = 80
I (domestic investment) = 20
G (government purchase) = 25
T (net taxes) = 10
FA (private capital flow) = +15 (credit)
a) How large is the private saving, public saving, and national saving, respectively?
b) How large is the net foreign investment? Is country M a lender or borrower?
c) If country M adopts a fixed exchange rate system, what kind of exchange pressure does its monetary authority face?
d) What’s the action needed by the monetary authority to keep the exchange rate at par?
