For This Question,assume That the Economy Is Operating in a Fixed

question 42

Multiple Choice

For this question,assume that the economy is operating in a fixed exchange rate regime and that perfect capital mobility exists.Given this information,which of the following will occur?

• A)The domestic and foreign interest rates must be equal.
• B)The central bank cannot use monetary policy to affect domestic output.
• C)An expansionary fiscal policy will require that the central bank increase the money supply.
• D)all of the above
• E) none of the above

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Definitions:

Sustainable Growth Rate

The maximum growth rate a company can achieve without having to increase its financial leverage or debt.

Internal Growth Rate

The maximum rate at which a company can expand its operations using only internally generated revenues, without resorting to external financing.

Plowback Ratio

The proportion of earnings retained by a company after dividends are paid, usually to fund growth or pay down debt.

Debt-Equity Ratio

A measure used to evaluate a company's financial leverage, calculated by dividing its total liabilities by its shareholders' equity.