In a Small Open Economy, If the Government Adopts a Policy

question 32

Multiple Choice

In a small open economy, if the government adopts a policy that lowers imports, then the quantity of exports:

• A) remains unchanged.
• B) decreases but not as much as the quantity of imports decreases.
• C) decreases by exactly the same amount as the quantity of imports decreases.
• D) decreases by more than the quantity of imports decreases.

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Definitions:

Interest Rates

The cost of borrowing money, expressed as a percentage of the amount loaned, payable to the lender at a specified rate over a given period.

Borrowing Directly

The process where individuals or entities obtain funding directly from lenders without intermediaries, typically through issuing bonds or obtaining loans.

Supplier of Funds

An entity, such as a bank or financial institution, that provides capital to individuals or businesses in the form of loans or investments.

Saver

An individual or entity that regularly saves money through traditional saving vehicles or investments, often with the goal of achieving financial security or accumulating wealth.