Homework Answers
Ans: Surplus; Positive
Explanation:
When domestic saving exceeds domestic investment, then the extra saving will be used to make loans to foreigners. This will lead to a trade surplus and positive net capital outflow.
Thus, option [C] is correct answer.
Add Answer to:
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39. In a small open economy, if the world interest rate falls, then domestic investment will _and the real exchange...
39. In a small open economy, if the world interest rate falls, then domestic investment will _and the real exchange rate will holding all else constant. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase
QUICK CHECK multiple choice 1. Holding other things constant, an increase in the world interest rate...
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In the context of a small open economy with national savings independent of the interest rate,...
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3. E ffects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domesti...
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2. Consider a large open domestic economy with a financial account surplus. i. Draw a diagram sho...
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39. In a small open economy, if the world interest rate falls, then domestic investment will _and the real exchange rate will holding all else constant. A) decrease; decrease B) decrease; increase C) increase; decrease D) increase; increase
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2. Consider a large open domestic economy with a financial account surplus. i. Draw a diagram showing this situation (Your answer should include two graphs, one for the omestic economy and one for the foreign economy). (10 Points)- Note: Draw the two graphs side by side and clearly indicate the world interest rate as a single line going through both graphs. ii. What are the effects, in equilibrium, on the world real interest rate, domestic national saving, domestic investment, the...
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