Savings and Investment: Current Events in an Open Economy
In light of recent events, in an open economy like the US, assuming a zero current account balance. What happens to investment, real interest rates, current account balance and national saving of the US economy with the following events?
a. The US Congress and Mr. Obama introduce a "buy only American" policy in its legislation, which has the effect of driving up the cost of capital equipment
b. A technological breakthrough increases the quality and speed of mainframe computers a capital equipment used in many industries thereby increasing the future earnings in those industries
c. A decision by the US to use fiscal policy to run a fiscal deficit, mainly through unprecedented heavy spending, to stimulate the US economy