What impact do savings rates in Belgium have on the real interest rate that businesses in Belgium must pay to obtain the funds to finance their spending on plant and equipment?
What will be an ideal response?
Because Belgium is a small open economy, the domestic real interest rate will equal the world real interest rate. Because domestic saving in Belgium has no effect on the world real interest rate, the savings rate in Belgium has no impact on the real interest rate at which businesses in Belgium are able to borrow funds.
Economics
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