In the open-economy macroeconomic model, the key determinant of net capital outflow is the
A)real exchange rate.When the real exchange rate rises, net capital outflow rises.
B)real exchange rate.When the real exchange rate rises, net capital outflow falls.
C)real interest rate.When the real interest rate rises, net capital outflow rises.
D)real interest rate.When the real interest rate rises, net capital outflow falls.

Question

Quizplus · Accepted Answer

The key determinant of net capital outflow in the open-economy macroeconomic model is the real interest rate. When the real interest rate rises, net capital outflow falls because domestic assets become more attractive, leading investors to keep their capital in the country.

In the Open-Economy Macroeconomic Model, the Key Determinant of Net