Question

In a small open economy, if the world interest rate is r1, then the economy has: Group of answer choices

Answer 1

The remaining part of the question is:

1. domestic spending is greater than output.

2. saving is greater than investment.

3. net capital outflows are positive.

4. imports are less than exports.

Correct Answer:

1. domestic spending is greater than output.

Step-by-step explanation:

This is because, since the open economy is small, the world interest rate would lead to the domestic spending becoming greater than the output.