In the open-economy macroeconomic model, the key determinant of net capital outflow is: A. nominal exchange...

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

A. nominal exchange rate

B. the real interest rate

C. real exchange rate

D. nominal interest rate

Solutions

Expert Solution

Option B

B. the real interest rate

The real interest rate and net capital outflow are inversely related. An increase in the real interest rate domestically net capital outflow falls as the investors start investing in the country and if it is low then the investments go out of the country.

Rahul Sunny answered 1 year ago

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