The Domestic Real Interest Rate (R)for a Given Country Must

Multiple Choice

The domestic real interest rate (r) for a given country must be the same as the world real interest rate (rw) ________.

A) if perfect capital mobility is assumed
B) because with no barriers to capital flows,if rw > r domestic residents would just borrow abroad putting upward pressures on the domestic rate until both rates equal each other
C) because with no barriers to capital flows,if rw < r domestic residents would only lend to foreigners putting downward pressures on the domestic rate until both rates equal each other
D) all of the above
E) none of the above