Holding constant risk and the real returns available abroad, lower domestic real interest rates ________ capital inflows, ________ capital outflows, and ________ net capital inflows.
A)increase; increase; increase
B)increase; increase; decrease
C)increase; decrease; increase
D)decrease; increase; decrease

Question

Quizplus · Accepted Answer

Lower domestic real interest rates make investors domestic and foreign less likely to invest in the domestic economy compared to foreign economies. This increases capital outflows and decreases net capital inflows.

Holding Constant Risk and the Real Returns Available Abroad, Lower