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 CA? to CA? 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 CA? to CA? and the United States realizes net financial outflows.

Quizplus · Accepted Answer

According to the graph, decreasing taxes on income earned by U.S. residents from foreign investments leads to a shift in the capital and financial account schedule from CA? to CA?, resulting in higher net financial outflows.

Figure 133