In the open-economy macroeconomic model, net capital outflow links the markets for loanable funds and foreign-currency exchange.

Question

Quizplus · Accepted Answer

Net capital outflow represents the difference between domestic savings and domestic investment, and it is the link between the market for loanable funds (where savings and investments are determined) and the foreign-currency exchange market (where the currency exchange rates are determined based on the flow of funds into and out of the country).

In the Open-Economy Macroeconomic Model, Net Capital Outflow Links the Markets