In a Large Open Economy, the Exchange Rate Adjusts So

question 79

Multiple Choice

In a large open economy, the exchange rate adjusts so that net exports equal:

• A) domestic saving.
• B) domestic investment.
• C) net capital outflow.
• D) domestic investment plus net capital outflow.

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Definitions:

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project.

Abandonment Option

In project management and finance, the option to cease investment in a project if it doesn't meet certain criteria, minimizing losses.

Real Option

A managerial flexibility embedded in investment projects, representing the right, but not the obligation, to undertake certain business decisions, such as expanding, abandoning, or delaying a project.

Expansion Option

A strategic investment choice that gives a company the option but not the obligation to expand its operations or invest in new projects if market conditions are favorable.