Which of the following best predicts the effects of a fall in the Canadian real interest rate?
A)Owning Canadian assets becomes less attractive, and net capital outflow rises.
B)Owning Canadian assets becomes less attractive, and net capital outflow falls.
C)Owning Canadian assets becomes more attractive, and net capital outflow rises.
D)Owning Canadian assets becomes more attractive, and net capital outflow falls.

Question

Quizplus · Accepted Answer

A fall in the Canadian real interest rate makes Canadian assets less attractive to both domestic and foreign investors, leading to an increase in net capital outflow as investors seek higher returns elsewhere.

Which of the Following Best Predicts the Effects of a Fall