If we observe an economy in which desired saving has changed,but there has been no change in actual investment,we may infer that ________.
A)this is a closed economy
B)this is a large economy
C)the world real interest rate has not changed
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

If desired saving has changed but there has been no change in actual investment, it suggests that the world real interest rate has not changed. In an open economy, changes in desired savings or investment can be offset by capital flows from abroad, while in a closed economy there can be no capital inflows or outflows. The size of the economy is not relevant in this scenario. Therefore, the correct answer is C.

If We Observe an Economy in Which Desired Saving Has