Figure 13.3.U.S.Capital and Financial Account Under a Fixed Exchange Rate System

-Refer to Figure 13.3.As the U.S.government decreases taxes on income earned by U.S.residents from foreign investments,the U.S.capital and financial account schedule shifts downward from CA0 to CA1 and the United States realizes net financial outflows.

Question

Figure 13.3.U.S.Capital and Financial Account Under a Fixed Exchange Rate System
 
-Refer to Figure 13.3.As the U.S.government decreases taxes on income earned by U.S.residents from foreign investments,the U.S.capital and financial account schedule shifts downward from CA0 to CA1 and the United States realizes net financial outflows.

Quizplus · Accepted Answer

As taxes on income earned by U.S. residents from foreign investments decrease, the incentive to invest abroad increases, leading to a decrease in net financial inflows and an increase in net financial outflows.

Figure 133