In a Short-Run Model of a Large Open Economy with a Floating

Multiple Choice

In a short-run model of a large open economy with a floating exchange rate, net capital outflow ______ as the domestic interest rate increases and is just equal to ______.

A) decreases; the increase in net exports.
B) decreases; the decrease in net exports.
C) increases; the increase in net exports.
D) increases; the decrease in net exports.