Assuming the Free Flow of Capital Across Borders, Which of the Following

question 39

Multiple Choice

Assuming the free flow of capital across borders, which of the following statements is most correct?

• A) A central bank can have both a fixed exchange rate and an independent inflation policy.
• B) A central bank cannot have both a fixed exchange rate and an independent inflation policy.
• C) The central banks of most industrialized countries focus on fixed exchange rates.
• D) While most central banks of industrialized countries favor fixing exchange rates, their primary concern is on domestic inflation.

---

Definitions:

Balance Sheet

A document that provides a snapshot of a corporation's financial status, by listing its assets, debts, and the equity available to its shareholders at a given time.

Financial Position

A snapshot of an entity's finances at a particular time, including assets, liabilities, and equity, showing its economic standing.

Liabilities

Financial obligations or debts that a business or individual owes to others, which must be settled over time through the transfer of economic benefits including money, goods, or services.

Assets

Items of value owned by a person or company, including physical property, financial holdings, and intangible items that can be converted into cash.