In a small open economy, if the world real interest rate is above the rate at which national saving equals domestic investment, then there will be a trade ______ and ______ net capital outflow.
A) surplus; negative
B) deficit; positive
C) surplus; positive
D) deficit; negative

Question

Quizplus · Accepted Answer

When the world real interest rate is above the rate at which national saving equals domestic investment, the economy will save more than it invests domestically, leading to a trade surplus and positive net capital outflow.

In a Small Open Economy, If the World Real Interest