In the open-economy macroeconomic model, if the U.S. interest rate rises, then U.S
a. net capital outflow rises, so the supply of dollars in the market for foreign exchange shifts right.
b. net capital outflow rises, so the demand for dollars in the market for foreign exchange shifts right.
c. net capital outflow falls, so the supply of dollars in the market for foreign exchange shifts left.
d. net capital outflow falls, so the demand for dollars in the market for foreign exchange shifts left.
c
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Suppose that the U.S. interest rate is 5 percent and the Japanese interest rate is 1 percent. The effect of this difference in the foreign exchange market is that
A) financial capital stops moving. B) a Japanese investor is guaranteed to make an additional 4 percent in yen terms by investing in the United States. C) investors expect the yen to appreciate against the dollar. D) investors expect the yen to depreciate against the dollar.
Recently, new discount window lending procedures set a penalty rate that is normally __________ short-term market interest rates
A) just below B) above C) approximately equal to D) None of the above.