In a large open economy ________.
A) direction of the shifts in saving and investment on the trade balance are the same as for a small open economy
B) the direction of the shifts in saving and investment on net capital flows are the same as for a small open economy
C) the direction of the effect on the domestic real interest rate and the actual levels of saving and investment are the same as in a closed economy
D) all of the above
E) none of the above

Question

Quizplus · Accepted Answer

In a large open economy, the direction of the shifts in saving and investment on the trade balance are the same as for a small open economy. Similarly, the direction of the shifts in saving and investment on net capital flows are the same as for a small open economy. Also, the direction of the effect on the domestic real interest rate and the actual levels of saving and investment are the same as in a closed economy. Therefore, all of the above options are correct.

In a Large Open Economy ________