True False 0 Government budget deficits can lead to greater capital outflows. Capital tends to flow from high-growth to low-growth economies. The loanable fund model helps us understand net capital flows. Capital flows can occur because people are looking to spread their exposure to risk. Differences in interest rates are the only reason for two-way capital flows. Capital flows can occur as part of the company business strategy. A country facing net capital inflows will run an equivalent current account surplus. Capital flows tend to cause the divergence of interest rates across countries