In an economy open to international trade ________.
A)saving is net exports added to investment
B)saving equals investment as long as NX=0
C)the domestic real interest rate should equal the world real interest rate as long as there is perfect capital mobility
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

In an open economy, saving can indeed be described as net exports added to investment (reflecting the national accounting identity where S = I + NX), saving equals investment when net exports are zero (since S = I + NX, if NX = 0, then S = I), and the domestic real interest rate should equal the world real interest rate assuming perfect capital mobility, as investors would move funds to where they get the best returns, equalizing rates across borders.

In an Economy Open to International Trade ________