If U.S.citizens decide to save a larger fraction of their incomes,the real interest rate
A)decreases,the real exchange rate of the dollar depreciates,and U.S.net capital outflow increases.
B)decreases,the real exchange rate of the dollar appreciates,and U.S.net capital outflow decreases.
C)increases,the real exchange rate of the dollar appreciates,and U.S.net capital outflow decreases.
D)increases,the real exchange rate of the dollar depreciates,and U.S.net capital outflow increases.

Question

Quizplus · Accepted Answer

When U.S. citizens save more, the supply of loanable funds increases, leading to a decrease in the real interest rate. A lower interest rate makes U.S. assets less attractive, causing the dollar to depreciate and increasing net capital outflow.

If USCitizens Decide to Save a Larger Fraction of Their Incomes,the