In the open economy macroeconomic model, what is net capital outflow equal to?
A)the quantity of dollars supplied in the foreign exchange market
B)the quantity of dollars demand in the foreign exchange market
C)the quantity of funds supplied in the loanable funds market
D)the quantity of funds demanded in the loanable funds market

Question

Quizplus · Accepted Answer

Net capital outflow is equal to the quantity of dollars supplied in the foreign exchange market because it represents the domestic residents' purchase of foreign assets minus foreigners' purchase of domestic assets, which involves the supply of domestic currency to exchange for foreign currency.

In the Open Economy Macroeconomic Model, What Is Net Capital