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

-Refer to Figure 13.3.If the political and economic stability of foreign countries worsens relative to that of the United States,the U.S.capital and financial account schedule would shift downward from CA0 to CA1,resulting in net financial outflows from the United States.

Question

Figure 13.3.U.S.Capital and Financial Account Under a Fixed Exchange Rate System
 
-Refer to Figure 13.3.If the political and economic stability of foreign countries worsens relative to that of the United States,the U.S.capital and financial account schedule would shift downward from CA0 to CA1,resulting in net financial outflows from the United States.

Quizplus · Accepted Answer

If the political and economic stability of foreign countries worsens relative to the United States, it would likely lead to net financial inflows into the U.S. as investors seek a safer environment, causing the U.S. capital and financial account schedule to shift upward, not downward.

Figure 133