In a Short-Run Model of a Large Open Economy, After

Multiple Choice

In a short-run model of a large open economy, after net capital outflow is substituted for net exports in the IS curve:

A) the larger the absolute value of the responsiveness of net capital outflow with respect to the interest rate, the flatter the IS curve.
B) the larger the absolute value of the responsiveness of net capital outflow with respect to the interest rate, the steeper the IS curve.
C) if both domestic investment and net capital outflow are very responsive to the interest rate, they will tend to cancel each other out.
D) the slope of the IS curve depends only on the interest responsiveness of investment and the marginal propensity to consume.