Net capital outflow in a large country:
A) rises as the real domestic interest rate rises.
B) declines as the domestic interest rate rises.
C) depends on the foreign interest rate.
D) depends only on domestic saving.

Question

Quizplus · Accepted Answer

Net capital outflow declines as the domestic interest rate rises because higher domestic interest rates make domestic assets more attractive to investors, reducing the outflow of capital.

Net Capital Outflow in a Large Country