Which of the following does the open-economy macroeconomic model include?
A)only the market for loanable funds
B)only the market for foreign-currency exchange
C)both the market for loanable funds and the market for foreign-currency exchange
D)neither the market for loanable funds or the market for foreign-currency exchange

Question

Quizplus · Accepted Answer

The open-economy macroeconomic model includes both the market for loanable funds (which determines the interest rate and investment) and the market for foreign-currency exchange (which determines the exchange rate and the balance of trade). Therefore, option C is the correct answer. Option A and D are both incorrect because they omit one of the two key markets in the open economy. Option B is incorrect because it only includes the foreign-currency exchange market and not the loanable funds market.

Which of the Following Does the Open-Economy Macroeconomic Model Include