In an open economy,the domestic real interest rate affects

Question

Quizplus · Accepted Answer

In an open economy, the domestic real interest rate affects domestic saving and investment decisions, as higher real interest rates may lead to increased saving and decreased investment due to increased borrowing costs. It also affects net capital inflows as foreign investors may choose to invest more in the domestic economy due to higher real interest rates compared to their own country. Therefore, the best choice is E, as the domestic real interest rate affects all three variables - domestic saving, domestic investment, and net capital inflows.

In an Open Economy,the Domestic Real Interest Rate Affects