If a country changes its corporate tax laws so that domestic firms build and manage more firms overseas,then this country will

Question

Quizplus · Accepted Answer

If a country changes its corporate tax laws to encourage domestic firms to build and manage more firms overseas, it will lead to an increase in foreign direct investment (FDI) from the domestic firms. This increase in FDI will increase net capital outflow from the home country as domestic firms will be investing money in other countries, leading to a decrease in the domestic capital stock. Therefore, option A is the correct choice, as it explains that the increase in FDI will increase the net capital outflow.

If a Country Changes Its Corporate Tax Laws So That