With Fixed Exchange Rates and Capital Mobility

question 83

Multiple Choice

With fixed exchange rates and capital mobility:

• A) interest rates in the home country and in foreign countries are equalized.
• B) interest rates in the home country are higher.
• C) interest rates in foreign countries are higher.
• D) monetary policy maintains its autonomy.

---

Definitions:

Dividends Paid

The portion of a company’s earnings distributed to its shareholders, usually in the form of cash or additional shares.

Financial Leverage

The use of borrowed capital (debt) to increase the potential return of an investment.

Capital Structure

The blend of loans and shareholder capital utilized by a corporation to support its operational activities and development.

Debt

Borrowed money that is expected to be repaid in the future, typically with interest.