An increase in the interest rate would tend to reduce A. both domestic investmen

Question

An increase in the interest rate would tend to reduce A.  both domestic investment and net capital outflow. B.  neither domestic investment nor not capital outflow. C.  net capital outflow, but not domestic investment. D.  domestic investment, but not net capital outflow. An increase in the interest rate would tend to reduce A.  both domestic investment and net capital outflow. B.  neither domestic investment nor not capital outflow. C.  net capital outflow, but not domestic investment. D.  domestic investment, but not net capital outflow.

Explanation / Answer

Answer is ( D) Because due increase interest rate small enterpreneurs will borrow less amount of capital wich will reduce the domestic investment. But due to increase interest people will get high amount of interest for their savings so they will not invest in foriegn market thatswhy net capital outflow will reduce.

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