Investment is _______ related to the interest rate and net capital outflow is _______ related to the interest rate.
A) negatively; negatively
B) negatively; positively
C) positively; positively
D) positively; negatively

Question

Quizplus · Accepted Answer

Investment is negatively related to the interest rate because as interest rates increase, the cost of borrowing funds for investment rises, leading to a decrease in investment. Net capital outflow is also negatively related to the interest rate because as domestic interest rates rise, domestic assets become more attractive, leading to an inflow of capital and a decrease in net capital outflow.

Investment Is _______ Related to the Interest Rate and Net