When there are two large open economies,the world real interest rate will be such that
A)desired international lending by one country equals desired international borrowing by the other country.
B)desired international lending will be the same in both countries.
C)desired international borrowing will be the same in both countries.
D)desired international lending and borrowing will be zero in both countries.

Question

Quizplus · Accepted Answer

When there are two large open economies, the world real interest rate will adjust to equate the desired international lending by one country with the desired international borrowing by the other country. This is because both countries are interdependent and their financial decisions affect each other. Therefore, choice A is correct.

When There Are Two Large Open Economies,the World Real Interest