If the Bonds of Two Different Countries Are Identical, Their

question 83

Multiple Choice

If the bonds of two different countries are identical, their expected returns will:

• A)Be equal if capital flows freely internationally
• B)Always be equal
• C)Be equal only if the exchange rate between the two countries is fixed
• D)Be equal only if the inflation rate is the same in each country

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Definitions:

Natural Adjustments

Natural adjustments refer to the self-correcting mechanisms of markets or economies that respond to imbalances or disruptions without the need for external intervention.

Expansionary Gap

A situation where the actual output of an economy exceeds its potential output, typically characterized by increasing prices.

Self-corrects

Refers to the ability of a market or economic system to automatically adjust and return to equilibrium without outside intervention.

Active Approach

A strategy or method that involves direct engagement and proactive measures in addressing issues or tasks.