If a Country Experiences a Tremendous Increase in the Demand

question 23

Multiple Choice

If a country experiences a tremendous increase in the demand for loanable funds as many new infrastructure building projects are initiated, then the interest rate will

• A) Rise, there will be a decrease in net capital outflow, and the real exchange rate will fall.
• B) Rise, there will be a decrease in net capital outflow, and the real exchange rate will rise.
• C) Fall, there will be an increase in net capital outflow, and the real exchange rate will rise.
• D) Fall, there will be an increase in net capital outflow, and the real exchange rate will fall.

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Definitions:

Domestic Quantity

The total amount of a good or service produced within a country's borders, available for consumption or export.

Supplied

Refers to the total amount of a good or service that is available to consumers in a market at a given price level.

CD-Rom Drives

Hardware devices used to read and sometimes write data to CD-ROM discs, prevalent in computing before cloud storage and USB.

Imports

Goods or services brought into one country from another for the purpose of sale or use.