According to the Mundell-Fleming Model, Import Restrictions in an Economy

question 7

Multiple Choice

According to the Mundell-Fleming model, import restrictions in an economy with flexible exchange rates cause net exports to ______ and in an economy with fixed exchange rates import restrictions cause net exports to ______.

• A) increase; increase
• B) increase; remain unchanged
• C) remain unchanged; remain unchanged
• D) remain unchanged; increase

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Definitions:

Target Capital Structure

The optimal mix of debt, equity, and other securities that a firm aims to hold, which minimizes its cost of capital and maximizes its stock price.

Capital Budget

Planning for the acquisition and use of long-term assets to achieve a company’s strategic goals.

Payout Ratio

A financial metric indicating the percentage of a company's earnings paid out as dividends to shareholders, typically expressed as a percentage of net income.

Residual Dividend Policy

A strategy in which a company pays dividends to its shareholders from the residual or leftover equity once all project and operation costs have been met.