In a country with a small open economy, the real interest rate will always be:
A)above the world real interest rate.
B)below the world real interest rate.
C)equal to the world real interest rate.
D)equal to the world nominal interest rate.

Question

Quizplus · Accepted Answer

In a small open economy, the real interest rate is determined by the world real interest rate because the economy is too small to influence global interest rates and can borrow or lend at the prevailing world rate.

In a Country with a Small Open Economy, the Real