When the real interest rate in a country increases, it typically leads to an increase in ___ as investors seek higher returns on their investments.

When the real interest rate in a country increases, it usually leads to an increase in capital inflows. This happens because higher interest rates offer better returns on investments, making the country more attractive to investors from other countries. For example, if a country raises its interest rates to 5%, investors from abroad might move their money there to earn that higher return, rather than keeping it in their own country where the rates are lower. As a result, more foreign capital flows into the country, supporting economic growth and potentially strengthening the local currency. Thus, rising real interest rates can encourage investment and boost the economy.