Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 32 - Part XI - A Macroeconomic Theory of the Open Economy - Quick Check Multiple Choice - Page 702: 1

Answer

c. domestic investment and the net capital outflow.

Work Step by Step

Borrowing becomes more costly with a higher interest rate, and this will decrease domestic investment. The nation's domestic bonds will be more attractive to foreigners, and this will decrease investing abroad, thereby decreasing net capital outflow.
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