Countries a and B Trade Freely with Each Other

question 263

Multiple Choice

Countries A and B trade freely with each other. Suppose interest rates in the loanable funds market in country A are lower than in the country B. This means:

• A)funds will flow from country A to country B.
• B)this interest rate differential will persist as long as citizens view domestic assets as substitutes for foreign assets.
• C)funds will flow from country B to country A.
• D)interest rate differentials cannot be changed.

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Definitions:

Preferred Shareholders

Holders of preferred shares who may have a right to vote arising if dividends are not paid.

Dividends

Payments made by a corporation to its shareholders from profits, usually on a regular basis.

Vote

A formal indication of choice between options, typically in elections or other decision-making processes.

Lifting

The act or process of physically raising or elevating something.