Use a diagram of the open economy model (e.g. fig 32.4 from the text) to illustrate and explain the effect of the following event on the market for loanable funds, the level of net foreign investment and the market for foreign-currency exchange. In your answer make sure you discuss the impact on the following variables:
• Interest rates, public savings, private savings, national savings, investment, net foreign investment, supply of currency, the exchange rate and the level of net exports.
Event: There is an increase in consumer confidence in the economy