In an open economy, why is the supply curve for dollars in the foreign-currency exchange market vertical?
A. Net capital outflow is determined by real GDP, not the real exchange rate.
B. Net capital outflow is extremely sensitive to small changes in the real exchange rate.
C. Net capital outflow is determined by the real interest rate, not the real exchange rate.
D. Net capital outflow equals net exports.
Answer: C. Net capital outflow is determined by the real interest rate, not the real exchange rate.
You might also like to view...
High money prices for scarce goods
A) are one among many possible causes of their scarcity. B) are the basic cause of their scarcity. C) are the effect of their scarcity. D) have nothing to do with their scarcity, because almost all goods are scarce.
If a union can successfully shift the demand curve for union labor rightward, the union can achieve
A) an increase in wages and employment. B) an increase in wages but a decrease in employment. C) an increase in employment but a decrease in wages. D) a decrease in both employment and wages.
_____ is the argument that with globalization, countries compete for international investment by offering low or no environmental regulations or labor standards
a. "Free rider problem" b. "Tragedy of the commons" c. "Race to the bottom" d. "Flag of convenience" e. "Enlightened self-interest"
In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior
a. True b. False Indicate whether the statement is true or false