Suppose that the real return from operating factories in Ghana rises relative to the real rate of return in Canada. Which of the following best describes the effects of this transaction?
A)This will increase Canadian net capital outflow and decrease Ghanian net capital outflow.
B)This will decrease Canadian net capital outflow and increase Ghanian net capital outflow.
C)This will only increase Canadian net capital outflow.
D)This will only increase Ghanian net capital outflow.

Question

Quizplus · Accepted Answer

When the real return from operating factories in Ghana rises relative to Canada, Canadian investors are more likely to invest in Ghana, increasing Canadian net capital outflow. Conversely, Ghanaian investors are less likely to invest abroad, decreasing Ghanaian net capital outflow.

Suppose That the Real Return from Operating Factories in Ghana