Suppose that there are two large economies in the world, country A (the foreign country) and country B (the home country). Suppose that initially, both countries have a zero current account balance and the world real rate of interest is 5 percent. Suppose now that there is a technological innovation in country A (the foreign country) only. In this case, which of the following is correct? A. The world real interest rate will rise and country B (the home coun- try) will have a current account balance surplus. B. The world real interest rate will rise and country A (the foreign country) will have a current account balance surplus. C. The world real interest rate will fall and country B (the home coun- try) will have a current account balance surplus. D. The world real interest rate will fall and country A (the foreign

Suppose that there are two large economies in the world, country A (the foreign country) and country B (the home country). Suppose that initially, both countries have a zero current account balance and the world real rate of interest is 5 percent. Suppose now that there is a technological innovation in country A (the foreign country) only. In this case, which of the following is correct? A. The world real interest rate will rise and country B (the home coun- try) will have a current account balance surplus. B. The world real interest rate will rise and country A (the foreign country) will have a current account balance surplus. C. The world real interest rate will fall and country B (the home coun- try) will have a current account balance surplus. D. The world real interest rate will fall and country A (the foreign

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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