In the open-economy macroeconomic model,if a country's interest rate increases,its net capital outflow
A)and the real exchange rate increase.
B)and the real exchange rate decrease.
C)increases and the real exchange rate decreases.
D)decreases and the real exchange rate increases.

Question

Quizplus · Accepted Answer

When a country's interest rate increases, it attracts foreign capital, leading to a decrease in net capital outflow. This increased demand for the country's currency causes the real exchange rate to appreciate (increase).

In the Open-Economy Macroeconomic Model,if a Country's Interest Rate Increases,its