For an international capital-flow shock in which foreign investors lose confidence in a country
A. the country's real domestic product is affected if the country has a floating exchange rate but not affected if the country has a fixed exchange rate.
B. the country's real gross domestic product (GDP) decreases regardless of whether the country has a fixed or floating exchange rate, but the country's real GDP declines less if the country has a floating exchange rate.
C. the country's real GDP tends to decline if the country has a fixed exchange rate, but the country's real GDP tends to increase if the country has a floating exchange rate.
D. the country's real domestic product is affected if the country has a fixed exchange rate but is not affected if the country has a floating exchange rate.
Answer: C
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