Capital controls:
A. can be controls on capital inflows.
B. can only be controls on capital outflows.
C. must be controls on both capital inflows and outflows in order to be effective.
D. can be controls on capital inflows or outflows.
Answer: D
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The purchasing power parity theory is a reasonably good explanation for nominal exchange rate determination:
A. in the short run. B. in the long run. C. when there are fixed exchange rates. D. when there are significant volumes of non-traded goods and services.
The population of the United States grew _____ during the first half of the 19th century
a. slowly b. erratically c. about 3 percent per year d. about 6 percent per year
If the cross-price elasticity of two goods is 0.25, then we know that these goods are:
A. substitutes because their cross-price elasticity is greater than zero. B. complements because their cross-price elasticity is less than 1. C. substitutes because their cross-price elasticity is less than 1. D. complements because their cross-price elasticity is greater than zero.
Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to real GDP and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. Real GDP rises, and nominal value of the domestic currency falls. b. Real GDP rises, and nominal value of the domestic currency rises. c. Real GDP falls, and nominal value of the domestic currency remains the same. d. Real GDP falls, and nominal value of the domestic currency falls. e. Real GDP falls, and nominal value of the domestic currency rises.