An increase in a country's real interest rate reduces that country's net capital outflow.

Name: An increase in a country's real interest rate reduces that country's net capital outflow.
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Question

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An increase in a country's real interest rate makes domestic assets more attractive to foreign investors, leading to an inflow of capital into the country. This reduces the net capital outflow as more investment is coming into the country rather than leaving it.

An Increase in a Country's Real Interest Rate Reduces That