As the real interest rate ________,net capital outflows ________ and net exports ________.

Question

Quizplus · Accepted Answer

According to the interest rate parity theory, an increase in the domestic real interest rate relative to foreign real interest rate will increase the incentive for foreign investors to invest in the domestic country, leading to a decrease in net capital outflows. Additionally, an increase in the domestic real interest rate will appreciate the currency, making exports more expensive and reducing net exports. Therefore, as the real interest rate increases, net capital outflows decrease and net exports decrease as well.

As the Real Interest Rate ________,Net Capital Outflows ________ and Net

As the Real Interest Rate ,Net Capital Outflows and Net