Refer to Figure 19-3.The curve in panel b shows that as the interest rate rises,
A) domestic investment declines.
B) net capital outflow declines.
C) net capital outflow and domestic investment decline.
D) None of the above is correct.

Question

Quizplus · Accepted Answer

As the interest rate rises, net capital outflow declines because higher interest rates make domestic assets more attractive to foreign investors, reducing the outflow of capital.