Suppose that Pakistanis decide to increase their saving. a. If the elasticity of PAK net capital outflow with respect to the real interest rate is very high,
will this increase in private saving have a large or small effect on PAK domestic investment?
Explain with help of diagrams and in word.
b. If the elasticity of PAK exports with respect to the real exchange rate is very low, will this
increase in private saving have a large or small effect on the PAK real exchange rate? Explain
with help of diagrams and in word.