[All Steps] Define the terms "net capital outflow" and "real exchange rate." Based on the textbook’s model of a small, open economy with perfectly mobile
Question: Define the terms "net capital outflow" and "real exchange rate." Based on the textbook’s model of a small, open economy with perfectly mobile capital, what should happen to a nation’s net capital outflow (NCF) and real exchange rate (a) ifits supply of labor (L) decreases, all else equal? Be sure to clearly state a prediction (up, down, or no change) for both variables and illustrate your predictions with the relevant supply/demand diagrams.
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