A Small Open Economy

question 59

Multiple Choice

A small open economy

• A)is unable to affect the world real interest rate by its borrowing and lending decisions.
• B)will always be a net borrower from abroad.
• C)will always be a net lender abroad.
• D)is almost never able to borrow abroad.

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Definitions:

Transitivity

In decision theory, the principle that if preference A is greater than B, and B is greater than C, then A is greater than C.

Arrow's Impossibility Theorem

A theorem that demonstrates the impossibility of devising a social welfare function that satisfies all of a specified set of reasonable conditions simultaneously.

Majority Rule

A decision-making rule in which policies or choices are decided based on the preference of the majority of participants.

Transitive Preferences

A condition in decision-making where if an individual prefers option A over B, and B over C, then the individual also prefers A over C.