2.1 Saving and Investment in a Small Open Economy An open-economy version of the loanable funds model from chapter 3. -Includes many of the same elements: production function:Y=Y=F(K,L) consumption function:C=C(Y-T) investment function: I=I(r) exogenous policy variables:G=G,T=T CHAPTER8 The Open Economy slide 10 CHAPTER 8 The Open Economy slide 10 Saving and Investment in a Small Open Economy ▪ An open-economy version of the loanable funds model from chapter 3. ▪ Includes many of the same elements: production function: ( , ) Y Y F K L = = consumption function: ( ) C C Y T = − investment function: ( ) I I r = exogenous policy variables: , G G T T = = 2.1