In a Large Open Economy, the Interest Rate Adjusts So

question 109

Multiple Choice

In a large open economy, the interest rate adjusts so that domestic saving equals:

• A) domestic investment.
• B) net exports.
• C) net capital outflow.
• D) domestic investment plus net capital outflow.

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Definitions:

Returns To Scale

Rate at which output increases as inputs are increased proportionately.

Increasing Marginal Product

A situation where each additional unit of input results in an increased amount of output.

Economic Rents

Extra earnings above the minimum amount necessary to keep a factor of production in its current use.

Accounting Costs

The explicit costs of a business, representing the actual outflows of cash for wages, rent, materials, and other tangible inputs.