1. State three determinants of savings and investments

2. Describe two reasons why both variables above are low in developing countries.

3. Analyse how an economy can adjust or bounce back from a situation of excess aggregate supply to equilibrium state.

Gulliver travel agencies thinks interest rates in europe are low. the firm borrows euros at 5 percent for one year. during this time period the dollar falls 11 percent against the euro. what is the effective interest rate on the loan for one year? (consider the 11 percent fall in the value of the dollar as well as the interest payment.)