A Large Open Economy Increases Its Investment Demand

question 85

Multiple Choice

A large open economy increases its investment demand.This causes the world real interest rate to ________ and the country's current account balance to ________.

• A)rise;fall
• B)remain unchanged;rise
• C)rise;rise
• D)remain unchanged;fall

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Definitions:

Accounting Rate

Accounting rate, often referred to as the rate of return, measures the profitability of investments or projects expressed as a percentage.

Net Cash Flows

The total amount of cash being transferred into and out of a business, reflecting the company's overall financial health over a specific period.

Amortization Period

The length of time over which the principal of a debt is scheduled to be paid down through amortization.

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted for time value of money.