AP®︎ Macroeconomics: Topic 6.6 Flashcards

Master key terms and definitions for Topic 6.6 of AP Macroeconomics – Real Interest Rates and International Capital Flows to help you prep for quizzes and the AP exam.

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Term

Capital Flow

Definition

The movement of financial capital across countries for investment in assets.

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Capital Flow
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The movement of financial capital across countries for investment in assets.

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Real Interest Rate and Financial Capital Flows
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Financial capital moves toward countries with higher real interest rates and away from lower-yield countries.

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Net Capital Inflow
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The amount of capital entering a country minus the amount leaving it.

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Central Bank Influence On Interest Rates And Capital Flows
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Short-run monetary policy changes domestic interest rates, which changes net capital inflows or outflows.

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Capital Inflows And Capital Outflows
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Foreign asset purchases bring funds in, while domestic purchases of foreign assets send funds out.

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Foreign Exchange Market Effects Of Capital Flows
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Capital inflows raise demand for domestic currency, while outflows raise demand for foreign currency.

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Loanable Funds Market Effects Of Capital Flows
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Capital inflows increase loanable funds supply, while outflows decrease it and raise interest rates.

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