Capital flow.md

Net Capital Outflow= money investors send abroad. This is equal to Capital Outflow- Capital Inflow.

If interest rates increase, capital inflow increases and capital outflow decreases. As a result net capital flow decreases.

If interest rates decrease, capital inflow decreases and capital outflow increases as investments abroad are more lucrative. Net capital flow increases. Therefore capital flow is inversely related to r. ![[Pasted image 20221220200645.png|400]]

As a consumer, either save leftover money or invest+send it abroad. Therefore, $S=I+CF$ $CF=S-I$

We also know, from [[investment]] that $S=I+NX$ in an [[net exports|open economy]]

Therefore, $CF=NX$