In a Large Open Economy, If Political Instability Abroad Lowers

Multiple Choice

In a large open economy, if political instability abroad lowers the net capital outflow function, then the real interest rate:

A) rises, while the real exchange rate rises and net exports fall.
B) rises, while the real exchange rate falls and net exports rise.
C) falls, while the real exchange rate rises and net exports rise.
D) falls, while the real exchange rate rises and net exports fall.