In the Open-Economy Macroeconomic Model, the Key Determinant of Net

question 170

Multiple Choice

In the open-economy macroeconomic model, the key determinant of net capital outflow is the

• A)real exchange rate.When the real exchange rate rises, net capital outflow rises.
• B)real exchange rate.When the real exchange rate rises, net capital outflow falls.
• C)real interest rate.When the real interest rate rises, net capital outflow rises.
• D)real interest rate.When the real interest rate rises, net capital outflow falls.

---

Definitions:

Exchange Rate Risk

Exchange rate risk is the potential for investors to experience losses due to changes in the exchange rate between two currencies.

International Commerce

The exchange of goods, services, and capital across international borders or territories.

Industrially Developed Nations

Countries with significant industrialization, advanced technological infrastructure, and high levels of income and standard of living.

Labor Migration

The movement of people from one geographical area to another for the purpose of employment.