Suppose That the Real Return from Operating Factories in Mexico

Multiple Choice

Suppose that the real return from operating factories in Mexico rises relative to the real rate of return in Canada. What are the effects of this transaction?

A) This will increase Canadian net capital outflow and decrease Mexican net capital outflow.
B) This will decrease Canadian net capital outflow and increase Mexican net capital outflow.
C) This will only affect Canadian net capital outflow.
D) This will only affect Mexican net capital outflow.