In an Open Economy, an Increase in Capital Inflows ______

question 10

Multiple Choice

In an open economy, an increase in capital inflows ______ the equilibrium domestic real interest rate and ______ the quantity of domestic investment.

• A)increases; increases
• B)increases; decreases
• C)decreases; does not change fall
• D)decreases; increases

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Definitions:

Lake Wobegon Effect

The tendency for people to overestimate their abilities or achievements relative to others, named after the fictional town where all the children are above average.

Above Average

Performance or measures that exceed the normal or expected benchmark.

Group Claims

Refers to assertions or demands made by a group of individuals, often in a legal or policy context, indicating a collective interest or right.

Hindsight Bias

The tendency to perceive events as having been predictable after they have already occurred.