Suppose that the real return from operating factories in France rises relative to the real rate of return in the United States. Other things the same, this will
A)increase U.S.net capital outflow and decrease French net capital outflow.
B)decrease U.S.net capital outflow and increase French net capital outflow.
C)only increase U.S.net capital outflow.
D)only increase French net capital outflow.

Question

Quizplus · Accepted Answer

When the real return from operating factories in France rises relative to the United States, investors will be more inclined to invest in France, leading to an increase in U.S. net capital outflow as capital moves from the U.S. to France. Conversely, French net capital outflow will decrease as more capital remains or is attracted to France.

Suppose That the Real Return from Operating Factories in France