If Canadian Firms Decide to Invest More Domestically at Each

Multiple Choice

If Canadian firms decide to invest more domestically at each interest rate, which of the following best describes the results?

A) The real interest rate decreases, the real exchange rate of the dollar depreciates, and Canadian net capital outflow decreases.
B) The real interest rate decreases, the real exchange rate of the dollar appreciates, and Canadian net capital outflow increases.
C) The real interest rate increases, the real exchange rate of the dollar appreciates, and Canadian net capital outflow decreases.
D) The real interest rate increases, the real exchange rate of the dollar depreciates, and Canadian net capital outflow increases.