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.

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Definitions:

Depreciation Expense

The allocated portion of the cost of a fixed asset, charged as an expense over its useful life.

Interest Expense

The expenses an entity faces for borrowing money.

Sunk Costs

Costs that have already been incurred and cannot be recovered or altered and should not affect current and future business decisions.

Erosion Costs

Costs incurred when a new project or product negatively impacts the sales and profits of existing products or services.