Question

The open-economy macroeconomic model examines the determination of a. unemployment and the exchange rate. b. the output growth rate and the real interest rate. c. the trade balance and the exchange rate. d. the output growth rate and the inflation rate.

Answer 1

Answer:

c. the trade balance and the exchange rate.

Explanation:

An Open Economy is an economy that allows the free inflow and outflow of goods, services, capital and people. The opposite of a closed economy.

What sets these two models apart is that in an open economy, both imports and exports are allowed, so that countries necessarily have to trade in more than one currency, so the exchange rate must be examined. In addition, business transactions are recorded in a balance of payments. So these are the two concepts that are not tried in a closed economy analysis, but are introduced in an open economy.