In the open-economy macroeconomic model, if the supply of loanable funds increases, net capital outflow
a. and the real exchange rate increase.
b. and the real exchange rate decrease.
c. increases and the real exchange rate decreases.
d. decreases and the real exchange rate increases.
c
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A deficit in the current account means:
a. Actually, a deficit in the current account is impossible. It must equal zero. b. Imports of goods and services exceed exports of goods and services. c. The sum of the financial and capital accounts is positive. d. The sum of exports of goods and services plus net international income is negative. e. The sum of the financial, capital, and reserve accounts is positive.
Which of the following is likely to cause monetary restraint to be effective?
A. Businesses have the ability to borrow funds from foreign banks. B. People behave rationally and borrow less when interest rates rise. C. High expectations overwhelm high interest rates. D. None of the choices are correct.