Use the following to answer questions :
Exhibit: Saving and Investment in a Small Open Economy
-(Exhibit: Saving and Investment in a Small Open Economy) In a small open economy, if the world interest rate is r₃, then the economy has:

Question

Use the following to answer questions :
Exhibit: Saving and Investment in a Small Open Economy

-(Exhibit: Saving and Investment in a Small Open Economy) In a small open economy, if the world interest rate is r₃, then the economy has:

Quizplus · Accepted Answer

When the world interest rate is higher than the domestic interest rate, there will be capital outflows from the small open economy, leading to a trade deficit.

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