In an Open Economy, an Increase in Capital Inflows ________

question 13

Multiple Choice

In an open economy, an increase in capital inflows ________ the equilibrium domestic real interest rate and ________ the quantity of domestic investment.

• A)increases; increases
• B)increases; decreases
• C)decreases; decreases
• D)decreases; increases

---

Definitions:

Dominant Position

A situation in which a business or entity holds a major share of the market or has a significant influence over the market conditions.

Large Firms

Corporations or enterprises that operate on a large scale, often having significant market power and capitalization.

Monopolistically Competitive

This describes a market structure where many firms sell products that are similar but not identical, allowing for some degree of market power.

Marginal Cost

The added cost incurred from producing one more unit of a product or service, essentially the derivative of the total cost with respect to quantity.