If the demand for net exports rises,which of the following happens in the open-economy macroeconomic model?
A)the exchange rate rises
B)the interest rate falls
C)net capital outflow rises
D)All of the above are correct.

Question

Quizplus · Accepted Answer

According to the open-economy macroeconomic model, an increase in the demand for net exports will result in an increase in the demand for the domestic currency, causing the exchange rate to rise. This will make imports cheaper and exports more expensive, reducing the net exports to their original level. The interest rate and net capital outflow are not directly affected by the increase in the demand for net exports.

If the Demand for Net Exports Rises,which of the Following