Which of the following best predicts the effects of an increase in the Canadian real interest rate?
A)Canadian net capital outflow and net capital outflow of other countries would rise.
B)Canadian net capital outflow and net capital outflow of other countries would fall.
C)Canadian net capital outflow would rise, while net capital outflow of other countries would fall.
D)Canadian net capital outflow would fall, while net capital outflow of other countries would rise.

Question

Quizplus · Accepted Answer

An increase in the Canadian real interest rate would attract foreign capital, reducing Canadian net capital outflow, while other countries might experience increased capital outflow as investors seek higher returns in Canada.

Which of the Following Best Predicts the Effects of an Increase