A fall in the world interest rate faced by a small open economy
will cause
1. its savings to increase and world investment
in it to decline so that its net capital outflow will increase.
2. its savings to decline and world investment
in it to increase so that its net capital inflow will decrease.
3. its savings to increase and world investment
in it to decline so that its net capital inflow will decrease.
4. its savings to decline and world investment
in it to increase so that its net capital inflow will increase.
Choose the correct option.