Holding constant risk and the real returns available abroad, higher domestic real interest rates __________ capital inflows, __________ capital outflows, and __________ net capital inflows.
Holding constant risk and the real returns available abroad, higher domestic real interest rates increase capital inflows, decrease capital outflows, and increase net capital inflows.
This is mainly.because when the real interest rates are high, that means the interest rates are well above the inflation level and investors, can get a higher yield. However, highers interest rates discourage borrowings as the cost of capital is high.
