Question

If a war broke out in Afghanistan, it would affect Pakistan economy in many ways. Use the model of the     large open economy to examine each of the following effects of such a war. What happens to saving,     investment, the trade balance, the interest rate, and the exchange rate in Pakistan? (To keep things     simple,     consider each of the following effects separately. But explain why? Donot use graph)
    a.    Pakistan government, fearing it may need to enter the war, increases its purchases of military             equipment.
    b.    Other countries raise their demand for fighter jet, a major export of Pakistan.
    c.    The war makes Pakistani firms uncertain about the future, and the firms delay some investment             projects.
    d.    The war makes Pakistani consumers uncertain about the future, and the consumers save more in             response.
    e.    Pakistanis become apprehensive about traveling abroad, so more of them spend their vacations in             Pakistan.
    f.    Foreign investors seek a safe haven for their portfolios in Pakistan​

Answer 1

Answer:

as if we all know that Afghanistan is suffering...