Question
In the short-run model of a large economy, assuming that both Europe and the U.S. are large open economies, an increase in European interest rates
In the short-run model of a large economy, assuming that both Europe and the U.S. are large open economies, an increase in European interest rates relative to the U.S interest rates
a.
increases net capital outflows from the U.S., appreciates the U.S. dollar against the euro and decreases U.S. exports.
b.
increases net capital outflows from the U.S., depreciates the U.S. dollar against the euro and increases U.S. exports.
c.
decreases net capital outflows from the U.S., appreciates the U.S. dollar against the euro and decreases U.S. exports.
d.
decreases net capital outflows from the U.S., depreciates the U.S. dollar against the euro and decreases U.S. exports.
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