3. [8 points] On June 1, 2021, Thailand announced an increase in government spending by 140 billion baht as part of a Covid stimulus package. Use the goods & services market to predict the effects of this fiscal shock on interest rates, saving, investment, and net exports for Thailand and the rest of the world in the following three cases: (a) Thailand is closed; (b) Thailand is a small open economy; (c) Thailand is open and large.
4. [6 points] In the early 1980s, Brazil and South Korea had similar saving rates (around 17% of GDP) and similar levels of income per capita (around $6,000 in 1996 dollars). In the 1980-2010 period, the saving rate stayed around 17% in Brazil, whereas it increased to more than 30% in Korea. (a) Use the Solow model to predict the effects on the steady-state income per capita for both countries (assuming their multifactor productivity gains were exactly the same) and compare. (b) In 2010, income per capita was $9,000 in Brazil, and $28,000 in Korea. Is this consistent with your predictions?