Question

There is​ ________ relationship between the real interest rate and net capital outflows

A. no

B.

a positive

C.

a negative

D.

a constant

Which of the following is likely to decrease the federal funds​ rate?

A.

A decrease in the quantity of required reserves

B.The sale of

longminus−term

bonds in open market operations

C.

An increase in the supply of bank reserves

D.

A decrease in the interest paid on reserves deposited at the Fed

Answer 1

Negative. There is an inverse relation between real interest rate and net capital outflow. Higher interest rate will attract foreign capital and this decreases net capital outflow. Similarly lower interest rate discourage inflows of capital and therefore net capital outflow increases

Increase in supply of bank reserves. in the market for federal funds when there is an increase in the supply of reserves the supply curve shifts to the right and this decreases the federal funds rate.