A small open economy with free capital mobility experiences a temporary adverse supply shock.This causes the world real interest rate toand the country's current account balance toremain unchanged; fallfall; fallremain unchanged; riserise; rise

"Capital mobility" basically refers to the ease with which financial resources, such as money or…

A small open economy with free capital mobility experiences a temporary adverse supply shock and the country's current account balance to This causes the world real interest rate to remain unchanged; fall fall; fall remain unchanged; rise rise; rise

A small open economy with free capital mobility experiences a temporary adverse supply shock and the country's current account balance to This causes the world real interest rate to remain unchanged; fall fall; fall remain unchanged; rise rise; rise

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter29: International Finance

Section: Chapter Questions

Problem 5P

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Question

A small open economy with free capital mobility experiences a temporary adverse supply shock.
This causes the world real interest rate to
and the country's current account balance to
remain unchanged; fall
fall; fall
remain unchanged; rise
rise; rise

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When there are two large open economies in the world, if capital goods become relatively cheaper compared to consumption goods in the foreign country, the world real interest rate will and the home country's current account will fall; rise fall; fall rise; rise rise; fall