Which of the following statements is true?
A) An expansionary fiscal policy will tend to lower interest rates.
B) Lower interest rates lead to capital outflows.
C) Higher interest rates cause a depreciation of the currency.
D) Higher interest rates can lead to a current account surplus.
E) Interest rates do not affect capital flows.

Question

Quizplus · Accepted Answer

Lower interest rates make domestic investments less attractive compared to foreign investments, leading to capital moving out of the country in search of higher returns.

Which of the Following Statements Is True