Assume that Canada initially faces payments equilibrium in its merchandise trade account as well as in its capital and financial account.Now suppose that Canadian interest rates increase to levels higher than those abroad.For Canada,this tends to promote:
A) Net financial inflows
B) Net financial outflows
C) Net merchandise exports
D) Net merchandise imports

Question

Quizplus · Accepted Answer

Higher interest rates in Canada make it more attractive for foreign investors to invest in Canadian assets, leading to net financial inflows.

Assume That Canada Initially Faces Payments Equilibrium in Its Merchandise