1. According to the open-economy macroeconomic model, a decrease in the U.S. government budget deficit increases U.S. net capital outflow, causes the real exchange rate of the dollar to depreciate, and increases U.S. net exports.

a. TRUE

b. FALSE

2. Which of the following is correct?

A. capital flight from the United States decreases net capital outflow

B. an increase in the government budget deficit creates no change in net capital outflow

C. if the U.S. imposes a restriction on imports, net capital outflow increases

D. None of the above is correct.