Suppose That the Real Return from Operating Factories in France

question 132

Multiple Choice

Suppose that the real return from operating factories in France rises relative to the real rate of return in the United States. Other things the same, this will

• A)increase U.S.net capital outflow and decrease French net capital outflow.
• B)decrease U.S.net capital outflow and increase French net capital outflow.
• C)only increase U.S.net capital outflow.
• D)only increase French net capital outflow.

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Definitions:

Total Equity

The total value of a company’s assets minus its liabilities, representing the ownership interest of the shareholders.

Net Income

The total amount of profit a company earns after taxes and all expenses have been deducted from revenues, commonly referred to as the bottom line.

Sustainable Growth Rate

The highest speed at which a business can expand its profits without having to raise its debt levels or issue more equity.

Retention Ratio

The percentage of net income that is retained to be reinvested in the business, rather than being paid out as dividends.