In a Small Open Economy with Perfect Capital Mobility, If

question 9

Multiple Choice

In a small open economy with perfect capital mobility, if the domestic interest rate were to rise above the world interest rate, then ______ would drive the domestic interest rate back to the level of the world interest rate.

• A) capital inflow
• B) capital outflow
• C) the central bank
• D) a decline in domestic saving

---

Definitions:

Collective Agreements

Collective agreements are contracts made between employers and a group of employees, often represented by a union, determining the terms of employment, wages, and workplace policies and conditions.

Jurisdictional Dispute

A disagreement over who has authority; in the labour context, a dispute between two unions over which one should represent a group of employees, or over which union members ought to do a particular job.

Certification Process

The procedure through which an entity obtains official verification of its compliance with certain standards or qualifications.

Recognition Dispute

A disagreement or conflict over the acceptance or acknowledgment of something as valid or legitimate, such as authority, status, or rights.