Assuming the Free Flow of Capital Across Borders, If Country

question 21

Multiple Choice

Assuming the free flow of capital across borders, if country A wants to fix its exchange rate with country B, then:

• A)country A's inflation rate will have to match country B's.
• B)country A's monetary policy must be conducted so the inflation rate in country A matches the inflation rate in country B.
• C)country A's monetary policy will not be able to be used to address domestic issues.
• D)all of the answers given are correct.

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Definitions:

Country A

A placeholder name often used in hypothetical economic models or discussions to refer to an unspecified country.

Business Income

The profit or loss generated from a company's activities after deducting expenses.

Emigration

The act of leaving one's resident country or region with the intent to settle elsewhere.

Total Output

Total output is the overall quantity of goods or services produced by a company, sector, or economy within a certain period.