Principles of Macroeconomics
1. If the net capital outflow of the United States decreases, does that move the supply or demand of domestic loanable funds? Which direction? Why?
2. If citizens of the United States decide to save more money, will that strengthen or weaken the dollar? Describe the chain of cause and effect that links the savings decisions to the real exchange rate.
3. Explain why the demand for dollars is inversely related to the real exchange rate.
4. Is the net capital outflow increasing or decreasing in the domestic real interest rate? Why?