Question one: What happens when current k increases in closed economy?
In the circular nature of ubiquitous flow of goods and services, via the money market in a closed system, household consumption activities are at the heart of activities. Even when government plays a role in public goods, taxes, and borrowing one simple model of a closed system reflects the domestic economy as consisting of “the product market and money market” (“Macroeconomics Policies in an Open Economy,” 2017). This is illustrated below in ‘The Circular Flow’ [Note: Reprinted from the aforementioned source, 3.A General Model of the Closed Economy]. However, since the real interest rate in a closed economy would ...