When interest rates are higher in country A than in other countries:

Question

Quizplus · Accepted Answer

When interest rates are higher in a country, investors are attracted to invest in that country as they can earn a greater return on their investments. This leads to an increase in capital inflow, which is represented by choice B. Other countries will not borrow more from country A simply because of higher interest rates, and country A lending more to other countries is not a consequence of higher interest rates. Capital flowing out of country A is not expected either because of higher interest rates.

When Interest Rates Are Higher in Country a Than in Other