Figure 13.3.U.S.Capital and Financial Account Under a Fixed Exchange Rate System
-Refer to Figure 13.3.As U.S.interest rates rise relative to foreign interest rates,the U.S.slides upward along schedule CA₀,thus moving towards capital and financial account surplus.

Question

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

-Refer to Figure 13.3.As U.S.interest rates rise relative to foreign interest rates,the U.S.slides upward along schedule CA₀,thus moving towards capital and financial account surplus.

Quizplus · Accepted Answer

This is correct as higher U.S. interest rates would make investing in the U.S. more attractive, leading to an increase in capital inflows and a surplus in the capital and financial account. As the U.S. moves along schedule CA₀, it indicates an increase in capital inflows and a surplus in the capital and financial account.

Figure 133