If a country raises its budget deficit,then net capital outflow
A)rises,so the supply of its currency shifts right in the market for foreign-currency exchange.
B)rises,so the demand for its currency shifts right in the market for foreign-currency exchange.
C)falls,so the supply of its currency shifts left in the market for foreign-currency exchange.
D)falls,so the demand for its currency shifts right in the market for foreign-currency exchange.

Question

Quizplus · Accepted Answer

When a country raises its budget deficit, it often leads to higher interest rates, attracting foreign capital and reducing net capital outflow. This decreases the supply of its currency in the foreign exchange market, shifting the supply curve to the left.

If a Country Raises Its Budget Deficit,then Net Capital Outflow