Ceteris paribus, if the Australian real interest rate were to increase, Australian net foreign investment would:

Question

Quizplus · Accepted Answer

An increase in the real interest rate would make Australian financial assets more attractive to foreign investors, leading to a higher demand for Australian financial assets. However, this will also lead to a higher cost of financing for borrowing, discouraging Australian investors from borrowing, and investing abroad. Thus, the net effect would be a decrease in net foreign investment.

Ceteris Paribus, If the Australian Real Interest Rate Were to Increase