In the context of a small open economy with national savings independent of the interest rate,...

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In the context of a small open economy with national savings independent of the interest rate, an increase in taxation will A) increase the real interest rate. B) reduce the level of net exports. C) increase net capital outflow. D) reduce the level of national savings.

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Answer 1

Answer #1

Option D

National savings is composed of private and public saving, with the increase in taxation it would reduce the private saving and hence it reduces the level of national savings.

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Answer 2

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Add Answer to: In the context of a small open economy with national savings independent of the interest rate,...

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In the context of a small open economy with national savings independent of the interest rate,...