In small open economy with fixed exchange rate

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Answer True, False or Certainty. Explain your Answer

a) In a small open economy with a FIXED EXCHANGE RATE, the central bank buys foreign currency in the foreign exchange market to prevent a depreciation of the nominal exchange rate.

b) Assume two economies are identical in every way except that one has a higher saving rate. According to the Solow growth model, in the steady state the country with the higher saving rate will have a higher level of total output and a higher rate of growth of output per worker as/than the country with the lower saving rate.

Reference no: EM13837323

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