In an open economy, national saving equals
LEARNING OBJECTIVES. A. When an economy is closed then (1) aggregate spending must equal domestic production, and (2) national saving must equal domestic investment. B. When the economy is open, these conditions do not have to hold.a. Aggregate spending does not have to equal domestic production in each period.II. Relation between Saving, Investment, foreign trade, and foreign lending. Case 1. In a Small Open Economy. A. Small open economy: an economy which its saving/investment activities have no effect on the world real interest rate. 1. World real interest rate (rw) is determined in the international financial market. 2.