In the Basic Model of a Small Open Economy,when Foreign

question 86

Multiple Choice

In the basic model of a small open economy,when foreign governments reduce national saving in their countries,the equilibrium real exchange rate:

• A) rises and net exports fall.
• B) rises and net exports rise.
• C) falls and net exports fall.
• D) falls and net exports rise.

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Definitions:

Labor Supply Curve

A graphical representation showing the relationship between the quantity of labor workers are willing to offer and the wage rate, under ceteris paribus conditions.

Profit-maximizing

The strategy of adjusting input use and production output to achieve the greatest possible profit levels.

Marginal Revenue Product

The additional revenue generated by employing one more unit of a factor, like labor or capital, indicating the value of the marginal product of the factor.

Marginal Resource Cost

The additional cost incurred by using one more unit of a resource in production, contributing to decision-making about resource allocation.