An increase in total factor productivity has different effects in an open economy relative to a closed economy because
A) the real interest rate does not change in the open economy.
B) the real interest rate does not change in the closed economy.
C) it is a positive income effect in the closed economy and a negative one in the open economy.
D) the change in the real interest rate involves a substitution effect only in the open economy.
E) the real interest rate decreases in the open economy and increases in the closed economy.
Correct Answer:
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