The model utilizes the concept of a small open economy Which of the following statement is true ........

Economics- Phase (I & II) IS-LM

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The model utilizes the concept of a small, open economy. Which of the following statement is true?

There are effects on the rest of world, depending on developments in one country.

Japan is a good example, relative to the world GDP.

Open means, that there are no transaction costs, whatsoever.

Financial openness means that lending and borrowing across borders take place freely.

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Explanation:

Option 3 is false, because costs are included, although very limited. Japan is one of the few exceptions to the model. The assumption of being small, means there is no impact on the world economy

By: Barka Mirza

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The model utilizes the concept of a small open economy Which of the following statement is true ........

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