The domestic real interest rate (r)for a given country must be the same as the world real interest rate (rw)________. A)if perfect capital mobility is assumed B)because with no barriers to capital flows,if rw r domestic residents would just borrow abroad putting upward pressures on the domestic rate until both rates equal each other C)because with no barriers to capital flows,if rw

Question

The domestic real interest rate (r)for a given country must be the same as the world real interest rate (rw)________.
A)if perfect capital mobility is assumed
B)because with no barriers to capital flows,if rw > r domestic residents would just borrow abroad putting upward pressures on the domestic rate until both rates equal each other
C)because with no barriers to capital flows,if rw < r domestic residents would only lend to foreigners putting downward pressures on the domestic rate until both rates equal each other
D)all of the above
E)none of the above

Quizplus · Accepted Answer

The Answer of The domestic real interest rate (r)for a given country must be the same as the world real interest rate (rw)________.
A)if perfect capital mobility is assumed
B)because with no barriers to capital flows,if rw > r domestic residents would just borrow abroad putting upward pressures on the domestic rate until both rates equal each other
C)because with no barriers to capital flows,if rw < r domestic residents would only lend to foreigners putting downward pressures on the domestic rate until both rates equal each other
D)all of the above
E)none of the above

The Domestic Real Interest Rate (R)for a Given Country Must