In an open economy, an increase in capital inflows ________ the equilibrium domestic real interest rate and ________ the quantity of domestic investment.
A)increases; increases
B)increases; decreases
C)decreases; decreases
D)decreases; increases

Question

Quizplus · Accepted Answer

An increase in capital inflows decreases the real interest rate. This, in turn, increases domestic investment.

In an Open Economy, an Increase in Capital Inflows ________