Which of the following is the effect of an increase in the Canadian real interest rate above the world interest rate?
A)Canadians buy more foreign assets, which increases Canadian net capital outflow.
B)Canadians buy more foreign assets, which reduces Canadian net capital outflow.
C)Foreigners buy more Canadian assets, which reduces Canadian net capital outflow.
D)Foreigners buy more Canadian assets, which increases Canadian net capital outflow.

Question

Quizplus · Accepted Answer

When the Canadian real interest rate rises above the world interest rate, it becomes more attractive for foreigners to invest in Canadian assets, leading to an increase in foreign purchases of Canadian assets and a reduction in Canadian net capital outflow.

Which of the Following Is the Effect of an Increase