In the open-economy macroeconomic model,the supply of dollars in the market for foreign-currency exchange comes from
A)national saving
B)domestic investment
C)net exports
D)net capital outflow

Question

Quizplus · Accepted Answer

In the open economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from the net capital outflow. Net capital outflow is the difference between the domestic investment and national saving. When domestic investment is higher than national saving, there is a net outflow of capital, which increases the supply of dollars in the market for foreign-currency exchange. Therefore, the answer is D.

In the Open-Economy Macroeconomic Model,the Supply of Dollars in the Market