Question

Suppose that the real return from operating factories in Canada rises relative to the real rate of return in the United States. Other things the same, a. this will only increase U.S. net capital outflow. b. this will increases U.S. net capital outflow and decrease Canadian net capital outflow. c. this will only increase Canadian net capital outflow. d. this will decreases U.S. net capital outflow and increase Canadian net capital outflow.

Answer 1

Answer:

B, this will increase U.S. net capital outflow and decrease Canadian net capital outflow

Explanation:

Americans would now want to invest their money in Canadian factories over American factories due to the increase in the real rate of return.

At the same time, Canadians would be less likely to invest in American factories due to how Canadian factories are now more lucrative.