In the open-economy macroeconomic model, if the U.S. interest rate rises, then its
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 the U.S. interest rate rises, foreign investors are more attracted to U.S. assets, leading to a decrease in net capital outflow. This results in a reduced supply of dollars in the foreign exchange market, shifting the supply curve to the left.

In the Open-Economy Macroeconomic Model, If the U