Figure 32-3 Refer to the Following Diagram of the Open-Economy Macroeconomic Model

question 21

Multiple Choice

Figure 32-3
Refer to the following diagram of the open-economy macroeconomic model to answer the questions that follow.
​
Graph (a)
Graph (b) Graph (c) ​
-Refer to Figure 32-3. At an interest rate of 4 percent, the diagram indicates that

• A)there is a surplus in the market for foreign-currency exchange.
• B)national saving equals domestic investment.
• C)net capital outflow + domestic investment = national saving.
• D)in the market for foreign-currency exchange the quantity of dollars supplied equals the quantity of dollars demanded.

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Definitions:

Normal Good

A good for which demand increases as the income of the consumer increases, showing a positive relationship between income and demand.

Income Effect

The impact of income fluctuations on an individual or an economy on the quantity of goods or services that is demanded.

Price Decreases

A reduction in the cost at which goods and services are sold, making them more affordable to consumers.

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