Which of the Following Is Most Likely to Happen If

question 24

Multiple Choice

Which of the following is most likely to happen if the demand for money decreases in the domestic economy under floating exchange rates and free capital mobility?

• A)The domestic interest rate will increase.
• B)Domestic borrowing will decline.
• C)The financial account of the country's balance of payments will deteriorate.
• D)The average price level in the domestic economy will decrease.

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Definitions:

Economic Activities

Economic activities refer to actions that involve the production, distribution, and consumption of goods and services.

Subsidies

Financial support given by the government to businesses, organizations, or individuals, aimed at promoting economic and social policy objectives.

Stagnant Economy

A situation where an economy experiences minimal to no growth, often characterized by high unemployment and low consumer spending.

Interest Rates

The percentage at which interest is paid by borrowers for the use of money that they borrow from lenders.