If national savings remain unchanged and net capital outflow

If national savings remain unchanged and net capital outflow falls, what will happen to domestic investment (I)?

A) investment will fall

B) investment will remain unchanged

C) uncertain

D) investments will rise

Solution

Answer-D- Investment will rise

Here When domestic investment will rise then net capital outflow of the country will be falls. We know that the net capital outflow means that the amount that domestic investors lend abroad minus the amount that foriegn lenders lend in our country.