Other things the same,as the real interest rate falls
A)domestic investment and net capital outflow both rise.
B)domestic investment and net capital outflow both fall.
C)domestic investment rises and net capital outflow falls.
D)domestic investment falls and net capital outflow rises.

Question

Quizplus · Accepted Answer

When the real interest rate falls, domestic investment becomes more attractive, leading to a rise in domestic investment. At the same time, foreign investors will find it less attractive to invest in the domestic market, leading to a decrease in net capital outflow (capital outflow minus capital inflow). Therefore, both domestic investment and net capital outflow will rise.

Other Things the Same,as the Real Interest Rate Falls