Real Domestic Interest Rates Would Increase in a Large Open

question 95

Multiple Choice

Real domestic interest rates would increase in a large open economy if

• A)there were a temporary negative domestic supply shock.
• B)the government imposed capital controls and the capital and financial account had been in deficit.
• C)foreigners were more willing to save.
• D)there were a temporary negative supply shock abroad in a small open economy.

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Definitions:

Industries

Broad categories that group businesses and economic activities based on similar production processes, services, or goods produced.

Economy

The system of production, distribution, and consumption of goods and services within a particular geographic region.

Excise or Sales Taxes

Taxes imposed on the sale of specific goods and services, often included in the price paid by the consumer.

Tax Revenue

The revenue obtained by governments from taxes.