Canada can be categorized as a small open economy with perfect capital mobility-that is, changes in the Canadian economy will have only a slight effect, if any, on the prices of goods and services, and on interest rates, in the rest of the world.

Which of the following statements about perfect capital mobility are correct? Check all that apply.

A. Perfect capital mobility implies that Canadians have full access to world financial markets.

B. Since Canada is a small open economy with perfect capital mobility, the Canadian real interest rate and the world real interest rate must be equal.

C. Since Canada Is a small open economy with perfect capital mobility, the Canadian real interest rate must be less than the world real interest rate.

Suppose the world real interest rate (r^w) Is equal to 8% while the Canadian real interest rate (r) is 5%. Canadian savers would prefer to buy foreign assets that pay the world interest rate. With perfect capital mobility, Canadian borrowers would have to _____ in order to compete. In this way, the Canadian Interest rate would _____ the world Interest rate.