When the U.S.real interest rate rises,foreigners will want to purchase
A)more U.S.assets so U.S.net capital outflow rises.
B)more U.S.assets so U.S.net capital outflow falls.
C)less U.S.assets so U.S.net capital outflow rises.
D)less U.S.assets so U.S.net capital outflow falls.

Question

Quizplus · Accepted Answer

When the U.S. real interest rate rises, U.S. assets become more attractive to foreigners due to higher returns, leading to an increase in foreign purchases of U.S. assets. This results in a decrease in U.S. net capital outflow.