If for a Particular County an Increase in the Interest

question 88

Multiple Choice

If for a particular county an increase in the interest rate is more or less matched by an expected depreciation in the local currency,

• A)traders will probably be tempted to find another country to invest in.
• B)the interest rate increase per se will not be enough to spark capital flow into the country.
• C)both a and b are true
• D)capital will glow out of the country as the disgruntled citizens riot and go to war with the neighbors.

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Definitions:

Capital Markets

Financial markets where long-term debt or equity-backed securities are bought and sold, providing businesses and governments with a platform to raise funds.

Corporate Debt

Borrowed money that a company owes to creditors, which can be in the form of bonds, loans, or other debt instruments.

Financial Intermediation

The process by which financial institutions such as banks mediate or stand between savers and borrowers to facilitate financial transactions.

Financial Institution

An organization that provides financial services to its clients or members, such as banking, investing, and insurance.