Suppose the government of a small open economy reduces its spending,so that national saving increases.The result is
A)an increase in the real interest rate.
B)an increase in net exports.
C)a decrease in the real interest rate.
D)an increase in investment.

Question

Quizplus · Accepted Answer

In a small open economy, an increase in national saving leads to an increase in net exports because the excess savings are lent abroad, increasing the supply of loanable funds in the global market, which can lead to a trade surplus.

Suppose the Government of a Small Open Economy Reduces Its