When Arbitrage Occurs Across Countries with Flexible Exchange Rates and When

question 76

Multiple Choice

When arbitrage occurs across countries with flexible exchange rates and when the bonds in each country are identical and there are no barriers to capital flows:

• A) the interest rates on the bonds will be identical.
• B) the prices of the bonds will be identical.
• C) the inflation rates in each country will be identical.
• D) none of the answers provided is correct.

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