Starting from Trade Balance, If the World Interest Rate Falls

question 17

Multiple Choice

Starting from trade balance, if the world interest rate falls, then, holding other factors constant, in a small open economy the amount of domestic investment will and net exports will .

• A)increase; increase
• B)increase; decrease
• C)increase, not change
• D)decrease; increase

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Definitions:

Normal Rate Of Return

The average expected or required return on an investment or project, reflecting the usual profit level for the market or industry.

Last Dollar Spent

The concept referring to the allocation of the final unit of currency in an economic decision-making process.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, measuring the extent to which a company exceeds its break-even point.

Last Dollar Spent

A concept in consumer choice theory that refers to the allocation of the last unit of currency by a consumer to optimize utility.