Suppose that U.S. mutual funds suddenly decide to invest more in Canada.

a. What happens to Canadian net capital outflow, Canadian saving, and Canadian domestic investment?

b. What is the long-run effect on the Canadian capital stock?

c. How will this change in the capital stock affect the Canadian labor market? Does this U.S. investment in Canada make Canadian workers better off or worse off?

d. Do you think this will make U.S. workers better off or worse off? Can you think of any reason the impact on U.S. citizens generally may be different from the impact on U.S. workers?