When real interest rates decrease across Europe, this causes U.S. net capital outflow to decrease. The following graphs capture the effect this has onthe market for loanable funds and net capital outflow:Real Interest RateSupplyD₁02Quantity of Loanable FundsSTEP: 2 of 2?Real Interest Rate--OONet Capital OutflowNCO₁NCO₂? Indicate the effect these previous changes have on the U.S. market for foreign-currency exchange.Real Exchange RateTrueSupplyO FalseQuantity of DollarsAs a result, the U.S. real exchange rate appreciates.DemandDemandDSupply(?)

Due to fluctuations in export and import demand, the currency rate has the largest immediate impact…

Indicate the effect these previous changes have on the U.S. market for foreign-currency exchange. Real Exchange Rate Supply Quantity of Dollars Demand As a result, the U.S. real exchange rate appreciates. Demand Supply ?

Indicate the effect these previous changes have on the U.S. market for foreign-currency exchange. Real Exchange Rate Supply Quantity of Dollars Demand As a result, the U.S. real exchange rate appreciates. Demand Supply ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

When real interest rates decrease across Europe, this causes U.S. net capital outflow to decrease. The following graphs capture the effect this has on
the market for loanable funds and net capital outflow:
Real Interest Rate
Supply
D₁
02
Quantity of Loanable Funds
STEP: 2 of 2
?
Real Interest Rate
--O
O
Net Capital Outflow
NCO₁
NCO₂
?

Indicate the effect these previous changes have on the U.S. market for foreign-currency exchange.
Real Exchange Rate
True
Supply
O False
Quantity of Dollars
As a result, the U.S. real exchange rate appreciates.
Demand
Demand
D
Supply
(?)

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