Suppose that the real return from operating factories in Australia rises relative to the real rate of return in Canada.What are the effects of this transaction?
A) This will increase Canadian net capital outflow and decrease Australian net capital outflow.
B) This will decrease Canadian net capital outflow and increase Australian net capital outflow.
C) This will only affect Canadian net capital outflow.
D) This will only affect Australian net capital outflow.

Question

Quizplus · Accepted Answer

When the real return in Australia rises relative to Canada, investors will move capital from Canada to Australia, increasing Canadian net capital outflow and decreasing Australian net capital outflow.

Suppose That the Real Return from Operating Factories in Australia