An Increase in Total Factor Productivity Has Different Effects in an Open

question 68

Multiple Choice

An increase in total factor productivity has different effects in an open economy relative to a closed economy because

• A)the real interest rate does not change in the open economy.
• B)the real interest rate does not change in the closed economy.
• C)it is a positive income effect in the closed economy and a negative one in the open economy.
• D)the change in the real interest rate involves a substitution effect only in the open economy.
• E)the real interest rate decreases in the open economy and increases in the closed economy.