In the market for foreign-currency exchange in the open-economy macroeconomic model, what does the amount of net capital outflow represent?
A) the quantity of dollars supplied for the purpose of selling assets domestically
B) the quantity of dollars supplied for the purpose of buying assets abroad
C) the quantity of dollars demanded for the purpose of buying Canadian exports of goods and services
D) the quantity of dollars demanded for the purpose of importing foreign goods and services

Question

Quizplus · Accepted Answer

Net capital outflow represents the quantity of dollars supplied for the purpose of buying assets abroad. This is because net capital outflow is the difference between the amount of domestic saving invested abroad and the amount of foreign saving invested domestically. Therefore, a positive net capital outflow indicates that there is more domestic saving invested abroad, or in other words, more dollars supplied for the purpose of buying assets abroad.

In the Market for Foreign-Currency Exchange in the Open-Economy Macroeconomic