An Increase in Total Factor Productivity Has Different Effects in an Open

question 20

Multiple Choice

An increase in total factor productivity has different effects in an open economy relative to a closed economy because

• A) the real interest rate does not change in the open economy.
• B) the change in the real interest rate involves a substitution effect only in the open economy.
• C) the real interest rate does not change in the closed economy.
• D) the real interest rate decreases in the open economy and increases in the closed economy.
• E) it is a positive income effect in the closed economy and a negative one in the open economy.

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