The Greater the Amount of Short-Term Money Invested in a Country

question 44

Multiple Choice

The greater the amount of short-term money invested in a country, the

• A) stronger the domestic currency.
• B) greater the degree of globalization.
• C) greater the potential for a financial crisis.
• D) lesser the chance of a speculative attack.
• E) greater the long-term economic development potential.

---

Definitions:

Monetary Policy

Actions undertaken by a central bank to control the supply of money and interest rates in its economy.

Fiscal Policy

Government policies related to taxation and government spending to influence the economy.

Lags

Lags refer to the delay between the implementation of economic policy or action and its actual effect on the economy, often observed in fiscal and monetary policies.

Time-inconsistency Problem

The situation where a decision-maker's preferences change over time in such a way that what is preferred at one point in time is inconsistent with what is preferred at another time.