Holding constant risk and the real returns available abroad, higher domestic real interest rates ________ capital inflows, ________ capital outflows, and ________ net capital inflows.
A)increase; increase; increase
B)increase; increase; decrease
C)increase; decrease; increase
D)decrease; decrease; decrease

Question

Quizplus · Accepted Answer

Higher domestic real interest rates make investors domestic and foreign more likely to invest in the domestic economy compared to foreign economies. This reduces capital outflows and increases net capital inflows.

Holding Constant Risk and the Real Returns Available Abroad, Higher