Starting from a Trade Balance, If the World Interest Rate

question 28

Multiple Choice

Starting from a trade balance, if the world interest rate falls, then, holding other factors constant, in a small open economy the amount of domestic investment will _____ and net exports will _____.

• A) increase; increase
• B) increase; decrease
• C) increase, not change
• D) decrease; increase

---

Definitions:

Psychosexual Stage

A concept in Freudian psychology that describes a series of developmental stages in childhood, each characterized by the erogenous zone that is the source of a child's psychosexual energy.

Latency Stage

A phase in Freudian psychosexual development occurring between the ages of six and puberty, characterized by a decrease in sexual interest and increase in same-sex friendships.

Oral Stage

The first stage in Freud's psychosexual development theory, occurring in the first year of life, where the mouth is the primary source of pleasure and exploration.

Anal Stage

The second stage in Freud's psychosexual development theory, occurring from about 18 months to three years of age, where the focus of pleasure is on controlling bladder and bowel movements.