In the open-economy macroeconomic model,if a country's supply of loanable funds shifts right,then
A)net capital outflow rises,so the exchange rate rises.
B)net capital outflow rises,so the exchange rate falls.
C)net capital outflow falls,so the exchange rate rises.
D)net capital outflow falls,so the exchange rate falls.

Question

Quizplus · Accepted Answer

When the supply of loanable funds shifts right, it indicates an increase in savings, leading to lower interest rates. This encourages more capital outflow, increasing net capital outflow, which in turn causes the exchange rate to fall as the domestic currency depreciates.

In the Open-Economy Macroeconomic Model,if a Country's Supply of Loanable