Under a Floating Exchange Rate Regime with a Low Degree

question 27

Multiple Choice

Under a floating exchange rate regime with a low degree of capital mobility, if the domestic government uses an expansionary fiscal policy:

• A)the domestic interest rate increases.
• B)foreign capital inflows decrease domestic product.
• C)the financial account balance deteriorates.
• D)the official settlements balance tends to go into surplus.

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Definitions:

Superego

The superego is a component of Sigmund Freud's psychoanalytic theory representing the internalized moral standards and ideals that we acquire from both parents and society; it strives to act in a socially appropriate manner.

Sigmund Freud

An Austrian neurologist and the founder of psychoanalysis, a method for treating psychopathology through dialogue between a patient and a psychoanalyst.

Dorsal Frontal Cortex

A region of the brain's frontal lobes associated with executive functions such as planning, reasoning, and impulse control.

Ventral Frontal Cortex

A part of the frontal lobe in the human brain, associated with risk management, emotion, and complex social processes.