A Large Country Imposes Capital Controls That Prohibit Foreign Borrowing

question 100

Multiple Choice

A large country imposes capital controls that prohibit foreign borrowing and lending by domestic residents.The country is currently running a capital and financial account surplus.The imposition of the capital controls will cause

• A)net exports to decrease.
• B)real domestic interest rates to rise.
• C)real world interest rates to rise.
• D)desired national saving to fall.

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Definitions:

Diversification

A risk management strategy involving entering into new markets or adding new products to reduce dependency on a single market or product.

Product Development

The process of creating new products or enhancing existing ones, from concept through design, testing, and launching to the market.

Market Development

The process of expanding into new markets to increase sales and profitability, often by identifying and entering new geographic or demographic segments.

Market Penetration

The extent to which a product or service is recognized and bought by customers in a particular market.