Suppose that real interest rates increase across Europe. Explain how this development will affect U.S. net capital
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Suppose that real interest rates increase across Europe. Explain how this development will affect U.S. net capital outflow. Then explain how it will affect U.S. net exports by using a formula from the chapter and by drawing a diagram. What will happen to the U.S. real interest rate and real exchange rate?
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Higher real interest rates in Europe lead to increas...View the full answer
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