In an Open Economy with a Given Level of Real

question 39

Multiple Choice

In an open economy with a given level of real interest rates and risk, a decrease in real interest rates abroad will ________ capital inflows and ________ the equilibrium domestic real interest rate.

• A)increase; increase
• B)increase; decrease
• C)decrease; decrease
• D)decrease; increase

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Definitions:

Lump-sum

A single payment made at a particular time, as opposed to several smaller installment payments.

Individual Assets

Specific items of property owned by an individual or entity, including tangible and intangible assets.

Straight-line Depreciation

A technique for distributing the expense of a physical asset across its lifespan in uniform yearly sums.

Plant Asset

An asset used in the operations of a business that is not intended for sale to customers and is referred to as property, plant, and equipment (PP&E) in accounting.