In the open-economy macroeconomic model,if foreign interest rates rise and the U.S interest rate stays the same then,U.S.
A)net capital outflow rises,so the supply of dollars in the market for foreign exchange shifts right.
B)net capital outflow rises,so the demand for dollars in the market for foreign exchange shifts right.
C)net capital outflow falls,so the supply of dollars in the market for foreign exchange shifts left.
D)net capital outflow falls,so the demand for dollars in the market for foreign exchange shifts left.

Question

Quizplus · Accepted Answer

When foreign interest rates rise while U.S. interest rates remain unchanged, U.S. investors are more likely to invest abroad due to higher returns, increasing net capital outflow. This increases the supply of dollars in the foreign exchange market as more dollars are exchanged for foreign currencies.

In the Open-Economy Macroeconomic Model,if Foreign Interest Rates Rise and the U.S