In the open-economy macroeconomic model,if a country's interest rate rises,its net capital outflow
A)rises and the real exchange rate rises.
B)falls and the real exchange rate falls.
C)rises and the real exchange rate falls.
D)falls and the real exchange rate rises.

Question

Quizplus · Accepted Answer

When a country's interest rate rises, it attracts foreign capital, leading to a decrease in net capital outflow. This increased demand for the domestic currency causes the real exchange rate to rise.

In the Open-Economy Macroeconomic Model,if a Country's Interest Rate Rises,its