Consider a small open economy that takes the world real interest rate as given. Suppose that initially the world real interest rate is less than the country’s autarky real interest rate. Now suppose there is a change in tax policy that leads to an increase in domestic saving supply. Which of the following is TRUE? a. The economy may flip from importing capital to exporting capital b. There is an increase in the quantity of domestic investment c. There is an increase in the real interest rate paid to domestic savers d. None of the other options
Consider a small open economy that takes the world real interest rate as given. Suppose that initially the world real interest rate is less than the country’s autarky real interest rate. Now suppose there is a change in tax policy that leads to an increase in domestic saving supply. Which of the following is TRUE? a. The economy may flip from importing capital to exporting capital b. There is an increase in the quantity of domestic investment c. There is an increase in the real interest rate paid to domestic savers d. None of the other options
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: A Macroeconomic Theory Of The Open Economy
Section: Chapter Questions
Problem 1CQQ
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Consider a small open economy that takes the world real interest rate as given. Suppose that initially the world real interest rate is less than the country’s autarky real interest rate. Now suppose there is a change in tax policy that leads to an increase in domestic saving supply. Which of the following is TRUE?
a. The economy may flip from importing capital to exporting capital
b. There is an increase in the quantity of domestic investment
c. There is an increase in the real interest rate paid to domestic savers
d. None of the other options
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