Which of the following is true?
A. If capital is highly mobile, fiscal policy then loses its effectiveness under a fixed exchange rate.
B. Fixed exchange rates encourage countries to have different goals, priorities, and policies with respect to macroeconomic variables.
C. Countries that want to have a fixed exchange-rate regime should be willing to refrain from policy changes that lead to large international capital flows.
D. For a floating exchange rate to work for a country, it cannot have an inflation rate that is much above the inflation rate(s) of its primary trading partners.
Answer: C
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