Question

In a small open economy, if the world real interest rate is above the rate at which national saving equals domestic investment, then there will be a trade ______ and ______ net capital outflow. a. surplus; negative b. deficit; positive c. surplus; positive d. deficit; negative

Answer 1

There will be a trade surplus and positive net capital outflow.

There will be a net capital outflow if the global interest rate is higher than the domestic interest rate. Exports will exceed imports, resulting in a trade surplus.

What are the characteristics of an open economy?

• Its economy is reliant since it depends on other nations for both imports and exports.
• International alterations have an impact on it.

What is a trade surplus?

• There will be a net capital outflow if the global interest rate is higher than the domestic interest rate. export surplus A trade surplus is an economic indicator indicating a favorable trade balance where a nation's exports are more than its imports.
• When the outcome of the computation above is positive, there is a trade surplus. A trade surplus is the result of a net local money inflow from international markets. because exports will exceed imports.

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