Asked by Garrett Jones on May 23, 2024

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As the interest rate rises, it is possible that net capital outflow could move from a positive to a negative value.

Net Capital Outflow

The difference between domestic savings and domestic investment, representing the amount of capital leaving a country to invest abroad minus the capital inflowing from abroad for investment domestically.

Interest Rate

The percentage of a loan charged to the borrower as interest, usually represented as an annual percentage rate of the remaining loan balance.

  • Articulate the link between the market for borrowing and lending money, the net outflow of capital, and the exchange market for foreign currencies.
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Irene DepacinaMay 27, 2024
Final Answer :
True
Explanation :
As interest rates rise in a country, domestic assets become more attractive to both domestic and foreign investors, leading to an increase in the demand for the country's currency. This can result in a decrease in capital outflows as investors are more inclined to invest within the country or even an increase in capital inflows, potentially moving net capital outflow from a positive to a negative value.