In a small open economy in equilibrium:
A)saving is fixed, and investment is determined by the investment function and the world interest rate.
B)investment is fixed, and saving is determined by the saving function and the world interest rate.
C)saving is fixed, and investment is determined by the trade balance.
D)investment is fixed, and saving is determined by the trade balance.

Question

Quizplus · Accepted Answer

In a small open economy, saving is typically fixed by domestic factors, while investment is determined by the investment function and the world interest rate, which the economy takes as given.

In a Small Open Economy in Equilibrium