A "small" economy is one in which the:
A) level of output is fixed.
B) price level is fixed.
C) domestic interest rate equals the world interest rate.
D) domestic saving is less than domestic investment.

Question

Quizplus · Accepted Answer

A "small" economy is one that cannot affect world prices, interest rates, or other economic variables. Therefore, in a small economy, the domestic interest rate will tend to equal the world interest rate. The other options are not necessarily true for a small economy.

A "Small" Economy Is One in Which The