Refer to Figure 32-3. The curve in panel b shows that as the interest rate rises,
A)domestic investment declines.
B)net capital outflow declines.
C)net capital outflow and domestic investment decline.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

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