If Canadian Citizens Decide to Purchase More Foreign Assets at Each

question 122

Multiple Choice

If Canadian citizens decide to purchase more foreign assets at each interest rate, which statement would best describe the effects?

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

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Definitions:

Financing Activities

Transactions involving raising capital, repaying investors, and paying dividends as part of a company's capital structure management.

Net Cash

The amount of cash available after all cash inflows and outflows have been accounted for, often used in the context of operating, investing, and financing activities.

Bonds Payable

A financial liability representing the amount a company owes to holders of its issued bonds, typically repayable at a future date.

Cash Dividends

A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders in the form of cash.