Question

Which one of the following statements is FALSE regarding capital inflows to Canada and capital outflows from Canada?

	1.	Capital outflows from Canada are likely to weaken the Canadian dollar
	2.	Capital inflows to Canada are likely to strengthen the Canadian dollar
	3.	A positive economic outlook of Canada would attract capital inflows to Canada
	4.	A negative economic outlook of Canada would attract capital inflows to Canada
	5.	An expected economic crisis in Canada is likely to trigger an outflow of capital from Canada

Answer 1

Capital outflow is the movement of assets out of a country. It is undesirable and  likely to weaken the Canadian dollar

Capital inflows to Canada are associated with positive outlook such as autonomous increases in the domestic money demand function, increases in domestic productivity of capital,falling international interest rates.etc and are likely to strengthen the Canadian dollar

A positive economic outlook of Canada would attract capital inflows to Canada

An expected economic crisis in Canada is likely to trigger an outflow of capital from Canada as it is an undesirable situation.

So the false statement is 4)

A negative economic outlook of Canada would attract capital inflows to Canada