Consider This Statement: "Canada Is Characterized by Perfect Capital Mobility

question 105

Multiple Choice

Consider this statement: "Canada is characterized by perfect capital mobility." What does this mean in the language of economics?

• A) that capital is free to move across provinces in Canada
• B) that capital is free to move from one sector to another
• C) that Canadians can invest abroad but foreigners cannot invest in Canada
• D) that Canadians can invest abroad and foreigners can invest in Canada

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Definitions:

Exchange Rates

The value of one currency expressed in terms of another currency, affecting international trade and investments.

Generalized Fisher Effect

A theory stating that the real interest rate is independent of monetary measures, with nominal interest rates adjusting to expected inflation.

Real Interest Rates

The interest rates adjusted for inflation, representing the true cost of borrowing and the real yield to lenders or investors.

Forward Exchange Rate

The rate agreed today for exchange of two currencies at a future date, used in forward contracts.